After the three day week-end treasuries opened better this morning, at 8:45 the 10 yr note back testing its five week resistance levels at 3.29% with mortgages off .06 bp from Friday's close. At 8:30 the Fed's NY Empire State manufacturing index, expected at 12.0 was almost right on at 11.92 frm 9.89 in Dec; the new orders component increased to 12.39 frm 2.03, employment index at 8.42 frm -3.41 and prices pd index at 35.79 frm 28.11 (any index over zero is considered expansion, under zero contraction). Overall it didn't garner any interest among traders in rate or equity markets. 

The Jan NAHB housing market index at 10:00 was expected unchanged at 16, it came at 16, the third month in a row it has been at 16---a very weak reading.

Once again, right on queue, early trade this morning had the 10 yr note +11/32 at 3.39% and mortgage prices +4/32 (.12 bp). By 9:30 the 10 yr unable to break the wall of resistance at 3.28%-3.25% rate flipped; the 10 yr -10/32 at 3.37% and mortgage prices -14/32 (.44 bp). Any pricing from lenders prior to 9:30 is likely to be re-priced. The DJIA opened +13; the stock market being impacted some early on new Steve Jobs will take a leave due to his health.  

A four day work week with not much data, what there is is mainly on the housing sector.

         Wednesday;

               7:00 am weekly MBA mortgage applications

               8:30 am Dec housing starts (-1.0%)

                            Dec building permits (+4.4%)

         Thursday;

              8:30 weekly jobless claims (-20K to 425K, con't claims 3.90 mil frm 3.879 mil)

             10:00 am Dec existing home sales (+2.5%)

                            Dec leading economic indicators (+0.6%)

                           Jan Philadelphia Fed business index (20.5 frm 20.8, revised from 24.3 originally released last month)

Are you watching Barney and Chris? Pres Obama has ordered a complete review of all regulations to remove or overhaul those that inhibit economic expansion without helping consumers, advancing his outreach to the business community. Obama wrote in an opinion piece in the Wall Street Journal today that he’s mandating “a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.” He said the initiative is part of an executive order he will sign today codifying a “balanced” approach to regulation. “This order requires that federal agencies ensure that regulations protect our safety, health, and environment while promoting economic growth,” Obama wrote. “We are seeking more affordable, less intrusive means to achieve the same ends.” Since the big recession ended the last Congress led by Barney Frank and Chris Dodd went wild with new regulations, many added in a mood of panic and ignorance, with little understanding about consequences. The President is moving away from big government, realizing that citizens have had a gut full of Washington, we say hooray. Not a watershed but a step in the right direction.

We call your attention to the charts; the 10 yr yield chart clearly shows that every time the yield falls to 3.29%-3.25% any buying dries up and traders are free to sell. On the MBS FNMA 30 yr chart the technicals are better than the treasury note but won't improve much as long as the 10 yr fails at resistance. The MBS is holding its 20 day average but failing when the price moves to the 40 day average; the two averages are converging, something has to give.

So far this morning the interest rate markets have demonstrated high volatility; the 10 yr yield spiked up 8 basis points in fifteen minutes between 9:10 and 9:20, mortgage prices fell 14/32 (.44 bp) in the same timeframe. Some rebound at 9:35 but still weaker than the opens this morning.

 


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