Starting weaker today, after the 10 yr note once again fell to 3.28% on Monday yesterday selling put the yield back to 3.34%. The 10 is well defined now in a 20+ basis point range, on any rallies in the past month it finds heavy resistance at 3.28%/3.29% level (five times) and moves back up. This morning at 9:00 the 10 yr rate at 3.40%, moving back toward 3.50%. Mortgages this morning, following the 10 yr note, lower in price; down 9/32 (.28 bp). The stock index futures adding pressure in rate markets with key indexes early pointing to a strong opening at 9:30. At 9:30 the DJIA opened +60 points.

This afternoon's $21B 10 yr note auction and the stronger stock market this morning will likely keep the note and mortgages in check until the results of the auction are reported at 1:00. A good auction should support the note, a weak one will add more selling but will still keep the note and mortgages in their respective trading ranges.

Dec import prices were +1.1% about in line with estimates, non petroleum import prices up 0.4%; yr/yr import prices increased 4.8%, non petro +2.7%. Export prices were up 0.7% right on forecasts; yr/yr +6.5%, a record increase. No reaction to the data, it rarely gets much.

The weekly MBA mortgage applications index up 2.2% last week; the purchase index did decline 3.7% but re-fi index was up 4.9%. The average rate on a 30-year fixed loan dropped to 4.78% last week from 4.82% the prior week. The rate reached 4.21% in October, the lowest since the group’s records began in 1990. At the current 30-year rate, monthly payments for each $100,000 of a loan would be $523.46, or about $21 less than the same week the prior year, when the rate was 5.13%. The average rate on a 15-year fixed mortgage declined to 4.15%, from 4.23%. The rates include a 1.00% origination fee for 80% loans. The share of applicants seeking to refinance a loan rose to 72.1% last week from 71% the prior week.

The Fed's Beige Book will be released at 2:00; markets like it because of its detail but in terms of overall assessments on the economy nothing new is expected.  

Later this afternoon at 2:00 Treasury will report the Dec budget balance, normally Dec has a surplus with end of yr tax payments. This Dec the budget is expected at a deficit of $80.0B. No market reaction is expected.

 


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