At 8:30 this morning markets were hit with two economic reports that rocked interest rates and set up huge debate over the inflation outlook and the manufacturing sector. Nov producer price index was widely expected to increase 0.8%, it jumped 1.8%; the core excluding food and energy components was expected +0.2%, it spiked +0.5%. Also at 8:30 the NY Empire State manufacturing index was expected at 24.0 frm 23.51; it fell to 2.55. New orders at +2.2 frm +16.66, employment at -5.6 frm +1.32 and prices pd at 19.7 frm +10.53 (any read over zero is expansion. The increase in inflation at the wholesale level and the weak Empire State sent the 10 yr note -16/32 with the rate increasing to 3.62% +6 BP. Mortgage prices at 9:00 were down 15/32 (.46 bp).
At 9:15 additional data on manufacturing saved the day—-somewhat—for the equity markets. Nov industrial production expected at +0.5% increased 0.8%. Factory utilization expected at 71.1% was better at 71.3% frm 70.8% in Oct, the highest factory use this year.
Thin market conditions sent bond and mortgage prices lower on the 8:30 data but by 9:25 this morning some support stopped the selling. The 10 yr at 9:30 traded -13/32 at 3.60% +4 BP, mortgage prices -13/32 (.41 bp); the DJIA opened -36.
Treasuries rates are climbing, with the 10-year note yield at the highest level since August, after the wholesale prices in the U.S. increased more than anticipated in November. Inflation fears are increasing this morning, maybe just a blip but the difference between yields on 10-year notes and Treasury Inflation Protected Securities, or TIPS, a gauge of trader expectations for inflation, touched 2.26%, near the most this year.
Investors raised bets that the Fed will increase the target lending rate by at least a quarter-percentage point by its March meeting. The odds were 17% today, compared with 12% a month ago, based on the fed funds futures contracts on the Chicago Board of Trade.
Market Minute information for December 15, 2009 provided by:
 Patsy Bailey Mortgage Banker |
 4801 Lang Ave NE Suite 100 Albuquerque, NM 87109 4001 Office Court Ste 603 Sante Fe, NM 87507 Cell: 505.715.3231 Office: 505.473.4045 ext.109 E-mail: patsybailey13@gmail.com |
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