Mortgage Rates Improved Over Global Data

Japan auction a 30yr bond today.  The demand was very strong sending Japan rates down the biggest decline in three years. All of Japan’s interest rates from 7yrs to 30yrs hit record lows. Chinese exports and imports were hit with some very disappointing data - a double tap for global rates this morning.  The US Treasury 10yr opened up at 1.84% and really has not moved too much since.  Currently at 10:00AM, the 10yr is now at 1.81% and MBSs at a positive 38BPS.

It is all about the global data this morning as this is a light week for reports here in the US. Particularly the huge drop in Chinese exports is another reminder that you cannot simply focus on the US for market moving events.  The drop in China’s exports is almost as bad as in May 2009 when exports declined 26.4% yr/yr.

Goldman out today saying crude oil prices are likely to decline - no production cuts and supply is still well ahead of demand. Crude prices increasing has been the backbone for US stock index increases recently. If the price begins a turn expect US interest rates to regain momentum after this retracement. It is all about one commodity.

Goldman also issued a sell on AutoNation today. I briefly mentioned two weeks ago that the auto industry may be something to keep an eye n. Many new vehicles are on leases, leases are now coming due and according auto experts about to flood the used car markets. More used cars and trucks will pressure prices lower - in turn new auto prices will be strained. A sector I am watching more carefully now.

This afternoon Treasury will auction $24B of 3yr notes.  We must pay close attention to all auctions now, even the short end of the curve, as demand is increasingly more important as the global markets ebb and flow.

The techs today have a small boost but still the momentum now remains soft. That said, I still have not abandoned my view that US interest rates will decline as the US economy has no inflation and the growth path is not as strong as most are touting.

It is very unlikely we will see much improvement the rest of today, so right now, I am going to go back to cautiously floating and locking anything in the next 15 days.  However, this could be short lived, so stay close to the trigger.