Wednesday March 10, 2010

Wholesale Invertories were -0.2%. Some Fed members are criticising the Fed language that it would keep rates low for an extended period.  These people are concerned (I guess) about the long-term effects of expanded money supply and deficits.  The three long-term effects are inflation, inflation and inflation. Bloomberg has a strange piece discussing the Greek fiscal crisis.

Tuesday March 9, 2010

Treasuries are flat. Yesterday the FNMA & FHLMC mortgage rates (required net yields) were with 0.63% of the 10-year Treasury - a record low gap. The belief is that when the Fed exits the mortgage market the gap is likely to return to "normal" and mortgage rates will rise.  What is likely is that mortgage rates will have greater day-to-day volatility unless the Fed has the powers of persuasion to keep its member banks purchasing.

Monday March 8, 2010

Another wave of mortgage malaise is about to strike lenders.  Let me offer two indicators.  In April FDIC will start to auction loans from failed lenders. 63% of those loans are owned in part by other banks.  The second problem is that there is talk that FNMA and FHLMC will force lenders to buy back mortgages which are not performing.  Either the taxpayers are going to take the loss or the loss will be put back on banks who will then both take losses and perhaps start another wave of bank angst or the banks can put these back on originators and put some of them out of business.  This creates the unpleasant situation where banks can chose to put their competitors (mortgage banks and mortgage brokers) out of business.  Banks depend on mortgage banks and mortgage brokers to absorb some of the overhead in the mortgage origination  process so it is not clear what banks will do or it there will be any unanimity of policy.

Friday March 4, 2010

BLS payrolls were -36,000 which must be better than expected because equities are rallying and Treasuries selling. Employment was down in construction and information.  Manufacturing added jobs.  The Unemployment rate maintained at 9.7%.

To me this is a picture of an economy mending slowly.

Thursday March 4, 2010

Initial Jobless Claims were 469,000 last week.  Lower than previous but still high.  Worker Productivity was +6.9% for 4thQ2009.  Unfortunately this is not the result of technology but payoffs and "getting the same amount done with fewer people".  The soft labor market drove Unit labor costs down.  Pending Home Sales were -7.6% - blame bad weather and uncertainty about employment.

Wednesday March 3, 2010

The ISM Service Sector Index rose to 53 for February.  Anything above 50 indicates growth.  Treasury yields are higher.  ADP jobs shows -20,000.  We are like to see paralysis before Friday's jobs numbers from BLS.

Tuesday March 2, 2010

With little news, Treasury yields are increasing.  I have no idea why.

Monday March 1, 2010

Personal Income for January was +0.1%.  Personal Spending was +0.5%. Core PCE (an inflation measure) was flat. Construction Spending was -0.6%. The Personal Spending increase will help GDP.  Flat PCE should help contain interest rates.