Today - Tuesday, March 11, 2014
- NFIB Small Business Optimism Index: 91.4 vs. consensus of 94.0, 94.1 prior.
- Puerto Rico has reportedly attracted strong demand for $3B in bonds that the commonwealth expects to sell today at yields of 8.625-8.875%, which are at the bottom end of expectations.
- The apparent success of the auction comes despite lingering fears that Puerto Rico will restructure its existing debt.
- However, investors have been attracted by a range of factors, including the high interest, improved finances, better disclosure, and relief that the commonwealth even has access to the debt markets.
- Related ETFs: MUB, HYD, BAB, PZA, MUNI, TFI, ITM, HYMB, MLN, CMF, SHM, BABZ, BABS, XMPT, SUB, NYF, PRB, PZT, SMB, CXA, SHYD, PWZ, PVI, SMMU, MUAF, INY, MUAE, MUAD, MUAC, VRD, MUAG, GMMB, MUAH, RVNU
Monday, March 10, 2014
- Under the old plan from 2011, the Fed expected to take a number of steps to remove the trillions it pumped into the financial system. A new plan being considered would instead leave that money in, perhaps permanently, instead paying interest on excess reserves and anchoring rates using reverse repos.
- The upshot: The Fed would set interest rates by managing the cost rather than the supply of money.
- This jibes with previous Fed comments that the central may not have to actively sell MBS on its balance sheets, and just last week FRBNY President Bill Dudley said the Fed wouldn't have to allow paper to mature and run off its balance sheet months ahead of rate hikes.
- The new plan is just a trial balloon, reminds Hilsenrath, noting some at the Fed would prefer a return to the old days of scarce reserves and setting rates by managing those levels.
- Shorter-dated Treasury ETFs: SHY, IEF, PST, IEI, TYO, DTYS, UST, BIL, SHV, VGIT, TBX, VGSH, SCHO, GSY, DTYL, SCHR, ITE, TYD, DTUL, SST, FIVZ, DTUS, TUZ, DFVL, TBZ, DFVS, TYNS
Sunday, March 9, 2014
Friday, March 7, 2014
- "I conclude that the decline of the unemployment rate significantly overstates the degree of improvement in the labor market," says FRBNY chief Bill Dudley. Brushing aside talk the decline in the labor force participation rate is not to be worried about, Dudley: "Our own analysis suggests that the cyclical weakness of demand for labor is an important contributing factor."
- "If our assessment is correct, at some point an improving labor market should cause the labor force participation rate to stabilize or rise a bit as currently discouraged workers begin looking for work."
- The BLS notes severe winter weather occurring in much of the country during the February survey period. Bad weather - says the agency - is more likely to show up in average weekly hours than in the headline payroll number, and this month's report has the average workweek declining by 0.1 hours to 34.2 hours.
- Previous: Jobs +175K vs. +154K expected
- Maybe most surprising in today's report is the 0.4% increase in average hourly earnings, the biggest gain in nearly a year.
- The labor force participation rate is flat at 63% - it was 63.5% a year ago. The employment-to-population ratio is flat at 58.8% - it was 58.6% a year ago.
- Expiring unemployment benefits didn't put a dent in long-term unemployed which rose 203K.
- The broader U-6 unemployment rate slips to 12.6% from 12.7% - it was 14.9% a year ago.
- Bond traders are seeing a strong report, with the 10-year Treasury yield shooting up to 2.81% from 2.72% before the release. TLT -0.8%, TBT +1.7%.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, SBND, ZROZ, TLH, IEI, DLBS, TYO, DTYS, VGLT, UST, BIL, SHV, UBT, VGIT, VGSH, TBX, TLO, SCHO, GSY, DTYL, SCHR, LBND, ITE, TENZ, TYD, TYBS, DTUL, SST, DTUS, TUZ, FIVZ, DFVL, TBZ, DLBL, DFVS, TYNS
- February Nonfarm Payrolls: +175K vs. consensus +154K, +129K previous (revised from 113K).
- Unemployment rate: 6.7% vs. 6.6% consensus, 6.6% previous.
- The net worth of U.S. households and nonprofit organizations climbed 14% in 2013, or almost $10T, to a record $80.7T, a Fed report says, with Americans' wealth boosted by the soaring values of stocks and property.
- However, inequality has increased, says Fed economist William Emmons. "There seems to be a disconnect: There are big wealth gains, but not much follow-through on consumer spending."
- Much of the increase has gone to the wealthy and to older Americans, both of which are more likely to save than spend. The trend means that the immediate effect on economic growth could be limited.
Thursday, March 6, 2014
- Average fixed mortgage rates fell in the past week after four consecutive weeks of increases, according to the latest Freddie Mac survey.
- For the week ended today, the 30-year fixed-rate mortgage averaged 4.28% vs. 4.37% a week ago, and the 15-year fixed averaged 3.32% vs. 3.39% in the previous week.
- A year ago, the 30- and 15-year fixed rates averaged 3.52% and 2.76%, respectively.
- The weather knocked about 0.5-1% off of growth in Q1, says FRBNY boss Bill Dudley - now being interviewed by Jon Hilsenrath. Dudley now expects GDP to print at under 2% in Q1, but to rebound in Q2 as things warm up.
- The 6.5% unemployment rate threshold is "already obsolete" as we're just about already there and nobody expects a rate hike anytime soon. Dudley prefers the BOE's more qualitative approach where a broad range of labor market indicators are looked at.
- Webcast and blog here
- ETFs: SHY, IEF, PST, IEI, TYO, DTYS, UST, BIL, SHV, VGIT, VGSH, TBX, SCHO, GSY, DTYL, SCHR, ITE, TYD, DTUL, SST, FIVZ, DTUS, TUZ, DFVL, TBZ, DFVS, TYNS
- Bond prices add to losses following the strong jobless claims print, with 323K the lowest number since November. The 10-year Treasury yield gains three basis points to 2.74%, and TLT slips 0.7%. TBT +1.4%.
- The February jobs report is due at 8:30 ET tomorrow.
- ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, SBND, ZROZ, TLH, DLBS, VGLT, UBT, TLO, LBND, TENZ, TYBS, DLBL
- A check of Eurodollar futures shows traders are baking in the first Fed rate hike in Q1 of 2015.
Wednesday, March 5, 2014
- The effects of severe winter weather are evident throughout the economy, says the Fed Beige Book, but nevertheless, the expansion continues. Eight districts reported improved levels of activity, mostly characterized as modest to moderate. New York and Philadelphia experienced slight declines in activity thanks to the weather. Growth slowed in Chicago and Kansas City reported stable conditions.
- Retail sales weakened in most districts, again thanks to the weather, which somehow skipped Cleveland as it reported strong gains. Residential real estate continued to modestly improve in several areas, but Philadelphia, Cleveland, Minneapolis, and KC noted a decrease in sales.