Recap of Yesterday
NAHB: Builder confidence falls in October. NAHB urges Congress to extend FTHB tax credit: “Congressional action to expand the tax credit and extend it for one year would provide a critically needed boost to the employment market and economy, generating nearly 350,000 jobs, $28.2 billion in wages, salaries and business income and $11.6 billion in additional tax revenues. That’s an opportunity we can’t afford to pass up at this difficult time.”
The Federal Reserve comments on rumors regarding their intentions to conduct Reverse Repos in the open market. Most important quote: "This work is a matter of prudent advance planning by the Federal Reserve, and no inference should be drawn about the timing of monetary policy tightening."
Bernanke gives speech on Asia and the global financial crisis....says countries like China who have large trade surplus should discourage excess saving and promote consumption. Said the US needs to "substantially reduce federal deficits over time". Remember, Bernanke told Congress that our large budget deficit are a threat to the value of the dollar.
BB&T 3Q earnings: $0.23 per share, profit falls 56% as the regional bank puts aside $709 million in anticipation of more loan losses
Dollar traded near 14 month low vs. Euro
Oil crossed over $80/barrel, closed NY session +0.97% at $79.29/barrel. Watch prices rise at your local gas stations.
More better than expected earnings help stocks set new 2009 highs...again. S&P closes +0.94% at 1,097. NASDAQ +0.91% at 2,176. Dow +0.96% at 10,092.
Rates mostly range bound....yield curve flattening rally takes place after release of Fed's reverse repo comments, Barron's C'MON BEN article, and weaker than expected read on Homebuilder Confidence
10s head out the door at 3.38%, 2s day ends at 0.96%. 2s/10s at 242bps
The FN 4.0 closes at 98-05. FN 4.5 closes at 100-26
Secondary market current coupon at 4.36%
In MBS specific trade flows...it was very quiet trading session for mortgage-backs
Supply totaled about 1.5 billion. Volume thin
Money managers sold fuller coupons and bought "down in coupon" (take profits on FN 5.0/4.5 swap). Fed was seen buying "up in coupon"
Rate sheet influential MBS coupons were best performers vs. benchmarks. 6.0 and 6.5s were the worst
Fuller coupons too rich, need to cheapen up before fast money buyers return. Portfolio managers paying attention to buyout related prepayments as delinquencies are expected to continue to increase.
Mortgage rates were slightly better but nothing monumental
So Far This Morning
SHANGHAI +1.52%, HANG SENG +0.83%, TOPIX +0.84%, NIKKEI +0.98%, CAC +0.30%, DAX +0.25%, FTSE +0.05%
In minutes of Reserve Bank of Australia's October 6 meeting the RBA states they are prepared to continue raising rates...not really new information but something one should remember down the road.
Stock futures trade sideways most of night, dip in 3:00am hours, bounce back to 2009 highs by 4:30am
TSY futures trade lower than bounce higher in 3:00am hour, move lower by 4:30am. Still better than yesterday.
Before 830am data 10yr at 3.39%. FN 4.0 is +0-05 at 98-10. FN 4.5 is +0-03 at 100-28
830am Data
Producer Price Index: -0.6% vs. prior +1.7% . Worse than expected 0.0%
PPI EXFOOD/ENERGY -0.1 PCT (CONS +0.1 PCT) VS AUG +0.2 PCT
YEAR-OVER-YEAR PPI -4.8 PCT (CONS -4.2), CORE +1.8 PCT (CONS +2.0)
PPI INTERMEDIATE GOODS +0.2 PCT, EXFOOD/ENERGY +0.9 PCT
PPI CRUDE GOODS -2.1 PCT, EXFOOD/ENERGY +3.6 PCT
PPI ENERGY -2.4 PCT, GASOLINE -5.4 PCT, HEATING OIL -9.8 PCT
PPI FOOD -0.1 PCT, TOBACCO +0.2 PCT, PASSENGER CARS +1.0 PCT, LIGHT TRUCKS -1.4
PPI LIGHT TRUCKS DECLINE LARGEST SINCE JUNE 2008 (-1.6 PCT)
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