Prior to 8:30 and Oct durable goods orders the bond, stock and MBS markets were unchanged from yesterday. At 8:30 Oct durable goods orders were expected to have declined 0.8%, ex-transportation orders -0.4%. As reported durables were unchanged from Sept’s +9.2%; ex transportation orders durables increased 1.5%. The strength in orders was a major surprise as most data that make up the data were weaker. The initial reaction added a little support in the stock index futures trading, the interest rate market saw very minor selling taking the 10 yr note frm +3/32 to unchanged (1.66%) at 8:45. Durables are a very volatile series so not much reaction.
German bonds declined, with 10-year yields rising the most in a week, after European finance ministers meeting in Brussels eased the terms on emergency aid for Greece, damping demand for the region’s safest assets. EU finance ministers agreed to allow Greece to receive $44.6B loan in December and worked out a bond buyback of Greece’s debt by Greece. Spain’s interest rates felon the agreement. There is relatively little reaction to the agreement in the EU markets or in the US. The German 10 yr bund yield increased 3 bp to 1.44%, the worst level at 1.47% before some improvement. The euro currency declined on disbelief the deal will work out, Greece unlikely to buy back its debt?
Sept Case/Shiller 20 city home price index was about what was expected, up 3.0% yr/yr and the highest prices since July 2010. It is one more data point that confirms the housing sector is recovering. Today’s report also included quarterly national figures. Prices covering all of the U.S. increased 3.6% in the third quarter from the same period in 2011 compared with a 1.6% gain in the year ended June.
At 9:30 the DJIA opened -32, NASDAQ -4, S&P -2. 10 yr note at 9:30 1.66% unch; 30 yr MBS price +1 bp.
More data at 10:00; Nov consumer confidence index expected at 73.0, increased to 73.7; Oct confidence level revised from 72.2 to 73.1; confidence increasing. The Richmond Fed manufacturing index also better; forecasts were for -8, it increased to +9 frm -7 in Oct—another good number. Not so good; the Sept FHFA housing price index was expected up 0.5%, it was up just 0.2%, kind of contrary to the Case/Shiller report earlier this morning.
At 1:00 this afternoon Treasury will begin $99B of auctions with $35B of 2 yr notes. The auctions should go well this week, although two weeks ago the 3 yr and 10 yr didn’t see the demand expected.
The technicals on the bond and MBS markets remain generally neutral with no directional trend, but the bias remains slightly weaker for interest rates. Although we are not expecting much increase in rates, the near outlook is bothersome. On the other side, if rates do increase it won’t be by much with the Fed backing the interest rates sector.