Yesterday was a little bit of a head fake. We had reason to be hopeful that our luck might be changing when the day started out but by mid-morning the bond markets started to take a turn for the worse. The selling was a consistent grind into the close where we did end up at 2.00% on the 10yr. So since last Thursday’s close we have gone from 1.84% to 2.00% in just 3 trading days.
Now I have lived thru worse but such sell-offs never get easy and this one has additional meaning because of the pivotal 2.00% psychological barrier. It has been painful and today it is not getting better as we are opening @ 2.02% but try and look at things with a little humor by realizing that A-Rod did have a much worse day yesterday. The big difference there is that he has a few hundred million reasons to get over his problems. So it is very apparent that the stock markets are determined to keep the rally going in-spite of a weak GDP report this morning that indicates our economy is not as strong as many thought. I get the feeling that the stock markets want to print a 14k Dow and will do it regardless of logic.
We are currently at 13,953 so a part of me wants to just get there because I expect a retreat from that milestone. At this time the bond markets & stock markets are playing off each other. It happens in such a orchestrated way from time to time and right now the bond markets are just getting beat-up because of this. We do have the Fed announcement at 2:15 today that is a culmination of their FOMC meeting. So we can only hope that they continue to be the gift that keeps on giving. There is nothing that is expected to be outside the box in their announcement but hopefully they say something that gets the bond buyers back.
We did have ADP report for January this morning which was pretty much shrugged off by the markets but worth mentioning because it is a prelude to Fridays NFP report. The ADP when factoring the December revisions came in as expected. So this does set the stage for Friday morning because the markets have no reason to not expect the consensus of +160k. Like we said yesterday it is going to be a big number because it will either validate this bond market sell-off or it will bring it into question. Let’s hope for the latter.
Last but not least we got the release of the Weekly Application Survey from the MBA. It showed an expected decline which you can bet your bottom dollar will only get worse next week. Here are the highlights:
- Mortgage applications were down 8.1%;
- The Refinance Index decreased 10%;
- The Purchase Index decreased 2%;
- The refinance share decreased to 79% for last week’s 82%;
- The conventional 30yr rate increased to 3.67% w/.42pts which is the highest since Sept ’12. This rate has increased in 6 of the last 7 weeks;
- The 30yr FHA rate increased to 3.48% w/.33pts;
- The 15yr rate increased to 2.95% w/.38pts;
- The 5/1 ARM decreased to 2.60% w/.33pts.