To recap, the seven-year auction was the biggest Thursday news story for bonds as weekly unemployment claims were the only noteworthy economic data releases and they were in line with expectations. Demand at the seven-year auction was not quite as strong as for the shorter maturities earlier in the week but the week’s auctions were overall very well received. The GDP figures released this morning include an overall 2.4% growth rate for the second quarter, slightly below expectations and well below the first quarter pace of 3.7%. This number reflected a larger trade deficit and an easing in consumer spending. The loss of momentum is disconcerting, adding emphasis to statements made by Federal Reserve Bank of St. Louis President James Bullard. He said in a paper and reinforced in an interview his belief that the economy is still at risk and that “The U.S. is closer to a Japanese-style outcome today than at any time in recent history”.
Last bit of news today was the Univ. of Michigan Sentiment, posting a print of 67.8. This was significantly lower than the June print of 76 and was the lowest result since November. Stock market volatility may have contributed, as consumers continue to say they are depressed despite the jump in spending early in the year. The GDP figures and the relatively weak economic data releases this week suggest bonds should be well bid for today and going further.
On a positive note, for the sixth week in a row now, Austin mortgage rates have eased to all-time record lows, even during a week of pretty mixed housing data. Rates sit at the lowest point since Freddie began tracking it in 1971.
Buying today has helped the market maintain its bullish signals that have formed on intraday charts. However, one thing to note is that all have reached elevated readings that make additional upside less likely for the immediate time frame. This sets the market up for a pullback after bullish conditions on weekly and monthly charts get their way today. Now, this doesn’t suggest a major reversal is in play by any means, just a slight pause, possible into next week. I think any stability below a 2.95yld would still put us in a good position to do better.
Have a great weekend!