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Market Commentary

Market Commentary

February 18, 2015
10-YEAR NOTES   98-28 (-01)
FN 3.5% COUPON   104-03 (+00.5)
SUPPORT   2.40%
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    Today’s focus is on the FOMC statement release and any new insight as to how the Fed views the current economic situation. In the prior statement the Fed reiterated that they will remain “patient” in deciding when to raise rates, and would consider a wide range of data including global economic factors in determining the correct time for lift off. Since the statement release U.S. employment growth has exceeded forecasts and, although while inflation/wage growth remains stagnant, many believe this may push the Fed closer to hiking rates this year. Treasury yields have climbed this month since the January employment report came in hotter than expected, and ahead of today’s statement release 2-Year yields have hit the highest level this year.
    MBA Mortgage Applications fell -13.2% for the week ended February 13th after falling -9.0% the prior week (+13.9% YoY). Purchases fell -7.1% vs. -6.5% prior (+0.7% YoY), Refinancing fell -16.0% vs. -10.3% prior (+22.4% YoY), and the average interest rate for a 30-Year conventional loan rose to 3.93% vs. 3.84% prior (4.50% a year ago). Housing Starts declined -2.0% to 1065K vs. 1089K prior (consensus -1.7%). Building Permits also fell, down -0.7% to 1053K vs. 1032K prior (consensus +0.9%). Producer Prices dropped -0.8% in January, for the largest decline since November 2009. The decline in PPI was led by a -10.3% dip in energy. Industrial Production gained +0.2% in January after slipping -0.1% in December of last year. Treasuries are getting a boost this morning as many view today’s drop in PPI as a dilemma for Fed’s Plan to normalize policy and raise interest rates this year; if the Fed raises rates without clear signs of inflation growth they risk crimping U.S. growth and causing deflation.
This Week's Events:
02/18 MBA Mortgage Applications 04:00 February 13 - -13.20% -9.00% -
02/18 Housing Starts 05:30 January 1070K 1065K 1089K 1087K
02/18 Housing Starts MoM 05:30 January -1.70% -2.00% 4.40% 7.1%
02/18 Building Permits 05:30 January 1067K 1053K 1032K 1060K
02/18 Building Permits MoM 05:30 January 0.90% -0.70% -1.90% 0.00%
02/18 PPI Final Demand MoM 05:30 January -0.40% -0.80% -0.30% -0.20%
02/18 PPI Final Demand YoY 05:30 January 0.30% 0.00% 1.10% -
02/18 Industrial Production MoM 06:15 January 0.30% 0.20% -0.10% -0.30%
02/19 Jobless Claims 05:30 February 14 290K - 304K -
02/19 Continuing Claims 05:30 February 7 2360K - 2354K -
02/19 Leading Index 07:00 January 0.30% - 0.50% -
02/20 Markit US Manufacturing PMI 06:45 February P 53.6 - 53.9 -
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