US and global equity markets on fire this morning. The DJIA +113 in pre-opening trade. The rate markets are holding steady with some early gains. The ECB is saying it is likely to make just small adjustments to its monetary guidance next rather than any major changes. The comments pushed Europe’s stocks higher and supported a strong response in the US markets.
Stocks also getting a boost that AT&T/Time Warner merger will win over the Justice Dept. saying it will block the merger. Earnings from retailers are also adding to the stock market improvement. Trade volumes thin this week; that adds to the price volatility. On Monday we said we didn’t expect much movement in markets this week; doesn’t appear we were correct, given markets yesterday and this morning. Yearend buying is said to be moving markets higher, and of course there is little debate now that Congress will pass a tax cut bill, possibly before the end of the year. President Trump yesterday said he would not oppose keeping the penalty for those who don’t purchase health care insurance. The Senate version would eliminate the penalty.
Europe’s bond markets improved today and is following through in the US. Germany’s political situation in turmoil now; Angela Merkel failed to establish a coalition government after her party lost in the September elections. The strongest economy in Europe and the leader politically is now unsettled leading to some safe moves into sovereign debt; the 10-year German bund down 2 bps to 0.34%. Other sovereign debt markets in Europe also better; the only exceptions are Greece and the UK.
At 10:00 AM ET, the only data today: October existing home sales expected at 5.44 mil, up from 5.39 mil originally reported. Sales were at 5.48 mil, but September revised from 5.39 mil to 5.37 mil. Sales in October +2.0% from the revised September data; yr./yr. sales -0.9%. Strength shows for both single-family resales, up 2.1% to a 4.870 million rate and up 1.7% for condos to a 610,000 rate. Discounting was limited in October, with the price median down only 0.2% to $247,000 for 5.5% year-on-year appreciation. Supply is yet again a negative for resales, falling 3.2% to 1.800 million homes on the market. On a sales basis, supply is at a very thin 3.9 months following five straight readings at 4.2 months.
Technically, the 10 yr. is still in its two-month range keeping mortgage rates generally unchanged. Better this morning at 2.34% with strong resistance at 2.32%.
PRICES @ 10:10 AM
10 yr note: +8/32 (25 bp) 2.34% -3 bps
5 yr note: +2/32 (6 bp) 2.08% -1 bp
2 Yr note: -1/32 (3 bp) 1.77% +1 bp
30 yr bond: +23/32 (72 bp) 2.74% -4 bp
Libor Rates: 1 mo 1.294%; 3 mo 1.445%; 6 mo 1.634%; 1 yr 1.908%
30 yr FNMA 3.5 Dec: @9:30 102.66 +10 bp (+5 bp from 9:30 yesterday)
15 yr FNMA 3.0: @9:30 101.99 +3 bp (-3 bp from 9:30 yesterday)
30 yr GNMA 3.5: @9:30 103.58 +8 bp (+5 bp from 9:30 yesterday)
Dollar/Yen: 112.22 -0.40 yen
Dollar/Euro: $1.1737 +$0.0005
Dollar Index: 93.93 -0.12
Gold: $1283.00 +$7.70
Crude Oil: $56.74 +$0.32
DJIA: 23,566.04 +135.71
NASDAQ: 6847.62 +56.91
S&P 500: 2595.86 +13.72