Light Blue 25, Dark Blue 50, Pink 100 day averages US stocks are roaring early this morning on reports frm the ECB and China. Mario Draghi saying, he European Central Bank can’t hold back in its fight to revive the economy. “We will do what we must to raise inflation and inflation expectations as fast as possible, as our price-stability mandate requires.” Some inflation expectations “have been declining to levels that I would deem excessively low,” he said. The take away, the ECB may now be willing to take the steps necessary after moving too slow in the past to drive inflation higher in the region that is edging closer to deflation as the EU economies falter. The ECB is trying to boost the size of its balance sheet to early-2012 levels, signaling an increase of as much as 1 trillion euros ($1.24 trillion). Overnight China announced it would cut its base lending rate for the first time since July 2012. The one-year lending rate was reduced by 0.4% to 5.6%, while the one-year deposit rate was lowered by 0.25 percentage point to 2.75%, effective tomorrow, the People’s Bank of China said on its website today. China is now lining up with the ECB and the BofJ in adding additional stimulus to bolster its economy that has lost about half of its growth over the last two years. “This interest rates adjustment is a neutral operation and doesn’t mean any change in monetary policy direction,” the central bank said in a statement on its website explaining the rate cuts. Those two announcements have fueled a strong open this morning in the US stock indexes. The DJIA opened +152, NASDAQ +43, S&P +16. At 9:30 MBS price holding small gain, up 8 bps while the 10 yr note at 2.33% was down 1 bps. That the bond and mortgage markets are holding nicely with the stock market roaring ahead, is because both the ECB and China today have added more evidence that the level of inflation is not likely to increase quickly. With the Fed now outwardly concerned that it has been unable to move the level of inflation to its 2.0% target and saying in the FOMC minutes the progress is likely to take longer than most Fed officials had thought. No inflation concerns has a quieting effect on traders. There are no scheduled economic reports today. Nothing new in the bond and mortgage markets; the 10 is still in “the range”. The 20th day and not likely to exit it today. As long as the 10 trades in the narrow range we are reluctant to float overnight on the reality we would take on risk with little potential reward. No one is interested in selling their bonds and no one is willing to buy; how long that will last is hard to predict. A good thing really, lenders have more certainty about closings as long as there isn’t a significant improvement. For traders like us, it is extremely boring however. Traders need volatility to put food on the table, no movements means less opportunity. IF YOU FLOAT STAY CLOSE; WE WILL LET YOU KNOW IF ANY SIGNIFICANT SELLING BREAKS OUT. PRICES @ 10:00 AM 10 yr note: +4/32 (12 bp) 2.33% -1 bp 5 yr note: +2/32 (6 bp) 1.62% -1 bp 2 Yr note: unch 0.51% unch 30 yr bond: +12/32 (37 bp) 3.04% -1 bp Libor Rate: 1 mo 0.155%; 3 mo 0.231%; 6 mo 0.324%; 1 yr 0.562% 30 yr FNMA 3.5 Dec: @9:30 103.59 +8 bp (+4 bp frm 9:30 yesterday) 15 yr FNMA 3.0 Dec: @9:30 103.88 +2 bp (-3 bp frm 9:30 yesterday) 30 yr GNMA 3.5 Dec: @9:30 104.35 +3 bp (unch frm 9:30 yesterday) Dollar/Yen: 117.81 -0.40 yen Dollar/Euro: $1.2424 -$0.0115 Gold: $1202.50 +$11.60 Crude Oil: $76.48 +$0.63 DJIA: 17,866.58 +147.58 NASDAQ: 4736.00 +34.14 S&P 500: 2069.72 +16.97
Posted on: Fri, 21 Nov 2014 17:58:49 +0000