RATES IMPROVE DESPITE TREASURY DEBT AUCTIONS
STRAIGHT STATS
Mortgage interest rates improved slightly this past week despite supply pressures from Treasury debt auctions. The auction of $40 billion of 3 Year Notes, $21 billion of 10 Year Notes, and $13 billion of 30 Year Bonds was met with reasonably strong demand. Economic data was sparse. Of note, the March ISM Services Sector Index increased to 55.5, its highest level since May of 2006. February Pending Home Sales increased 8.2% on expectations that sales would be unchanged. Year over year, pending home sales increased 17.3%. Weekly jobless claims increased by 18k on expectations that they would fall by 6k and February Consumer Credit unexpectedly fell by $11.5 billion on expectations that it would increase by $1.6 billion.
COMMENTARY
Just when everyone was certain that long term rates would rise, they fell. Wednesdays 10-year T-note auction drew more bidders than any since 94, and its yield thumped down from near 4.00% to 3.85%, mortgages back down to 5.125%. The improvement is gradually reversing, but for the moment were okay. An $11.5 billion dive in consumer credit in February more than wiped out a revised gain in January, the first in 11 months. New claims for unemployment insurance were supposed to continue improvement, dropping to 433,000, but jumped to 460,000. Careful with the hosannas to March retail sales: the measure that jumped 9% was a year-over-year comparison, and March last year was the pit of panic. The easy Treasury auction revealed the enormous gulf between the noisy sustained-recovery believers, and the quiet skeptics who elbowed to buy the bonds. Perfesser Bernanke laid it out this week: We are still far from being out of the woods. Many Americans are still grappling with unemployment or foreclosure, or both.
