Morning’s Economic Data a Total Disaster
Posted on April 11th, 2008 in Daily Stock Market / Economic News - The Real Story
My o’ my what a disaster on the economic data front. Even without the huge GE miss, these data on their own could have caused the same reaction in the markets. Good thing is, they are buying Bonds pushing yields lower. In the ‘good ‘ol days’, this would have driven mortgage rates lower, as mortgage bonds more closely tracked the 10-year Note. While today’s Bond rally may cause rates to move lower, the opposite could happen if investors shun anything but US Treasuries due to the obviously worsening US economic situation and sell Fannie/Freddie mortgage backed assets like they did last month. We will see. You know things are not ‘contained’ when Bonds rally and mortgage rates do not fall. -Best, Mr Mortgage
IMPORT/EXPORT PRICES
Month-over-month 2.8% vs 2.0% expected
Year-over-year +14.8% vs 13.7% expected
(these numbers will likely rise, because components of the numbers above reflect prices on orders done months in the past)
APRIL PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE
63.2 actual vs 69 expected (A 26 YEAR LOW)
1-year inflation expectations at 4.8% vs 4.3% expected in March
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April 11th, 2008 7:40 am
It seems unlikely, in the short term at least, that lower Treasury yields will cause mortgage rates to fall.
Interest rates on Treasuries have fallen dramatically over the last 6 months, but mortgage rates have actually risen slightly for a variety of reasons.
One key point is that the surge in Treasuries is very much a flight to quality. By contrast, we can no longer describe mortgage securities, even those issued by quasi-GSEs, to be “quality”.
Hence the continuing widening of the spread between the two.
That’s my view.
Mr. Fed
April 11th, 2008 6:17 pm
You short treasuries?
April 11th, 2008 7:20 pm
I am long Treasuries because that may be the only thing worth anything when this whole upside down pyramid folds. I want to be short. Everyone does. But a 3.5 10-yr yield speaks volumes.