Stocks are higher and Mortgage Bonds are lower so far this morning. Initial Jobless Claims were released for the week ending March 8, and Claims fell 9k to 315k from last week’s slightly upwardly revised figure. This was much stronger than estimates of 330k, and the lowest reading in over 3 months. Claims have been trending lower which is encouraging for the economy. It remains to be seen whether this translates to real job growth.
Retail Sales were reported this morning and the headline number was released up 0.3%, which was higher than the 0.2% expected. When stripping out Autos and Gas, Sales were reported up 0.3%, which was also stronger than expectations. This was the first positive read we have seen in 3 months. Although this month’s release was higher, last month’s weak figures were revised even lower from -0.4% to -0.6%. We have to remember that after a decline, you need an even larger snap back to regain the ground lost. Here is an example: If an indicator fell by 25%, it would need at 33% gain to get back to even. Or if an indicator lost 33%, it would need a 50% gain to get back to even. So when we see these economic reports decreasing one week and then bouncing back the next, we have to remember that a larger bounce back is needed to regain all of the losses.
Later today there will be a $13B 30-year Treasury Bond Auction, which is always a potential market mover. Yesterday’s 10-year Treasury Note Auction was graded an “A” and helped push Mortgage Bonds higher. Result was better mortgage rates in the afternoon and this morning.
Mortgage Bonds are trading in a very tight range between support at the 200-day Moving Average and overhead resistance at the 50-day Moving Average. Two days ago there was a “Golden Cross”, which is a pattern formed when the 50-day Moving Average crosses upwards above the 200-day Moving Average. This is a bullish signal and often signifies better pricing ahead. The 10-year Treasury Note Yield was trying to “hold the line” and remain below the 50-day Moving Average, which is has. We can begin the day carefully floating, but should Mortgage Bonds break beneath support, we may have to switch our bias.