Maybe Shangri-Las were thinking about the fixed income market when they recorded their hit single, “Leader of the Pack” in 1964. Something like
“ I met them at the Treasury store, they told me that they were bad, but I knew they were really glad, that’s why I fell for the Leader of the Pack”.
Treasuries are the big dog on the global market with traders from all corners of world running to them for safety. Take for example the Treasury International Capital Flows (TIC Index) which measures the purchases of our Treasuries by foreign entities. In March alone, 108.4 billion were bought, making it the instrument of choice as global debt issues and stock market roller coasters rule the day. PPI, a measure of inflation at the wholesale level, hit the tape with a benign reading of minus .1% headline and a core print (ex-food and energy) of plus .2%. Nothing to be scared of here and if anything, a deflationary trend may be setting up due to the global slowdown in Europe.
April Housing Starts also hit the tape, up 5.8% to 672K units. Not bad except when you look at new Building Permits which dropped 11%. Still tough sledding for the builders out there. 10 year trading has been volatile this morning as we opened in the red (down 12/32’s) with mortgage backs off 5/32’s. Stocks have worked their way off the early morning highs ( opened up 80 now up 47), helping treasuries and mortgage backs to boot strap themselves back to unchanged.
USDA UPDATE: In a nut shell, the USDA program is out of money (except for disaster funds in a few areas). The Senate now has three competing bills so the work out process has begun. Nothing scheduled on the Senate floor so this could take some time. USDA issued guidance stating that they would issue condition commitments so we could proceed with the loan process but not close until the program was funded. USDA has now pulled that guidance to issue conditional commitments. As you can see, this is a mess. Investors such as Chase, etc. will not take locks unless you have a conditional commitment or are in a county that has adequate disaster funds available as they see this as hedging a “phantom” pipeline.
Have questions about USDA funds? Call me (512) 293-1239.