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Anthony Hood
Equity Investment Capital
Office: 949-891-0067
Email: tony@equityinvestmentcapital.com
website: www.equityinvestmentcapital.com
 

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Monday, December 27, 2010

The east coast hit by huge snow storms, the markets are thinner than normal for the last week of the year with delayed openings on some markets. Treasuries and mortgages opened weaker again this morning making it the third day with lower prices. There is nothing on the economic calendar today and not much data this week. The Treasury will auction $99B of notes this week beginning today with $35B of 2 yr notes, tomorrow $35B of 5 yr notes and Wednesday $29B of 7 yr notes. How strong the demand will dictate a lot of the trading this week, recent auctions have been slightly soft compared to stronger demand earlier this year. The markets have a four day week with all markets closed on Friday again.
 
The mortgage markets so far this morning are lower, weaker than treasury markets in terms of price declines. Still difficult to make much of the action with most large investors out of the markets through the remainder of the year; thin trading can exaggerate moves in either direction.
 
The People’s Bank of China boosted its key one-year lending and deposit rates by 25 basis points on Dec. 25 in what is likely too be a series of increases in 2011. That they did it on Christmas has some grousing about the timing. The reaction sent Europe's equity markets lower and the US stock market opening lower this morning. China is increasingly concerned about the increase in the inflation rate and over-heated economic growth. Most emerging-market stocks fell on speculation China’s central bank will accelerate increases in interest rates to slow the economy, after boosting borrowing costs for the second time since October. Most emerging-market stocks also fell on speculation China’s central bank will accelerate increases in interest rates to slow the economy, after boosting borrowing costs for the second time since October.
 
This Week's Economic Calendar:
         Monday,
            1:00 pm $35B 2 yr note auction
        Tuesday;
            9:00 am Case/Shiller Oct home price index
           10:00 am Dec consumer confidence index (56.1 frm 54.1)
           1:00 pm $35B 5 yr note auction
       Wednesday;
           1:00 pm $29B 7 yr note auction
       Thursday;
           8:30 am weekly jobless claims (-4K to 416K)
           9:45 am Chicago purchasing mgrs index (61.5 frm 62.5)
           10:00 am Nov pending home sales (-3.0% frm +10.4% in Oct)
      Friday;
          Markets closed; Happy New Year!
 
The auctions this week will likely keep rate markets from rallying; along with China's rate hike and investors mostly with closed books until next week, wide swings on unexpected news can occur. Early this morning the 10 yr note rate increased to 3.44% on the China rate hike but by 9:30 the 10 yr was unchanged from last Thursday at 3.40%. Mortgage markets soft and trading weaker than treasuries. The equity markets are weaker this morning, but so far there is no rotation to the bond market. The weather in NY has kept many from getting in on time, this afternoon activity may increase.