- Retail Sales hit the tape this morning, down .1% while the ex-autos component rose .7%. Both were better than expected.
- January sales were revised higher as well, up 1.8% from the previously reported plus 1.0%. The slight decline in February was due to a 4.3% drop in auto and auto parts sales, the largest decline since October 2008.
- Every retail sector reported sales growth except restaurants, building materials, and food/beverage. Given the print and revisions, 1st quarter GDP could improve by as much as 1%. Not bad.
- Weekly Unemployment Claims were a different story, up 9K to 654K.
- Continuing Claims really took a beating, up 193K to a record high 5.317 million. Getting people back to work will be the key to any economic growth going forward. President Obama, are you listening?
- Last on the economic agenda for today was Business Inventories which fell 1.1% while Sales fell 1.0%. Inventories were down in all major sectors which is good if sales were flat to higher. Trouble is, sales fell proportionately, leaving the sales to inventory ratio unchanged at 1.43, the highest since September of 2001. Economic growth is not to be found in that release.
Results of the 25 billion dollar 30 year bond auction just hit the tape with strong numbers. The issue stopped out at a yield of 3.64%, 4.5 bps thought the screen with a bid to cover ratio of 2.40%. Trust me, it’s a good auction. Whether it be the positive auction, better Retail Sales, higher unemployment, or the fraudster Bernie Madoff finally going from the penthouse to the big house, stock and bond/MBS traders are all bulled up.
Stocks have been steady to higher all day, currently up 145 points on the big board. The 10 year note is currently up 19/32’s to yield 2.84%.
Mortgage backs have gone along for the ride on both the news and the government being very aggressive all week long, buying MBS to prop up the market and better our mortgage pricing. MBS, lower coupon and note rates are up 9/32’s. Higher rates are plus 5/32’s. Technically, the buying today has formed a bullish buy signal on the hourly charts however, the market continues to struggle with the 40 day moving average. On one hand, sellers have not been able to push the market through the 3.0% yield mark. On the other hand, buyers have not been able to buy their way below 2.81% at the other side of the range. This is a great example of a market that’s not too cold, not too hot, but feeling just about right with the range trade we’ve been in for some time continuing to hold. In situations like this, Goldilocks would tell you to take advantage of mortgage pricing as we trade at or near the top of the range (2.81%) as the odds are likely we’ll slip a bit in the days to come, testing the bottom of that range at 3.0%.