Cue Thursday’s Record Rate Headlines Now

Rates are trying to cling to record lows but are a little off as mortgage bonds (MBS) are down. The Fannie Mae 3.5% coupon lenders use as a benchmark is down 8 basis points to 104.22 after a slew of U.S. data.

Homebuilder confidence is up but still nowhere close to positive. Inflation is flat. Regional manufacturing rebounded after a sharp decline last month. And retail sales are weak.

In all, U.S. sentiment is flat to slightly better. And chatter on Greece and their future in the Eurozone is still dour, which is offsetting any positive sentiment.

We can still expect Thursday’s headlines to show new record rate lows since those headlines are derived off of a Freddie Mac rate survey that runs through Wednesday each week.

Below is a roundup of today’s U.S. economic data, with more comments and charts…

National Assn of Homebuilders (NAHB) Confidence Index (May 2012)
– Homebuilder Confidence Index value for May was 29
– Highest since May 2007 and resumes up trend after dropping to 24 in April
– Still way off from 50+ considered to be healthy market
– 50 is dividing line between positive and negative sentiment
– Last 50+ reading was April 2006
Full report
– Here’s a table showing builder confidence from 1985-PRESENT

-And here’s NAHB Confidence vs. New Home Sales 1985-PRESENT by Reuters @scottybarber

CPI (April 2012)
– CPI Month/Month +0.2% overall
– CPI Month/Month unchanged core

-Well-contained inflation allows the Fed to keep its loose monetary policies in place. Unfortunately, loose monetary policy is not creating the desired growth in GDP and jobs.

Retail Sales (April 2012)
– Retail Sales, Month/Month +0.1%
– Retail Sales less autos, Month/Month +0.1%
– Less Autos & Gas, Month/Month +0.1%

Reportage of this bit of data reveals the clueless nature of most media. Last month when the data for March was reported at +0.8% it was hailed as growth. The problem is that Retail Sales is not adjusted for inflation. Retail Sales for March and April indicate flat spending in terms of real (inflation adjusted) purchases and only show that we had a spike in gas prices in March.

Take a look at the following which shows soft consumer spending.

ICSC-Goldman Store Sales (week ended 5/12)
– Store Sales, Week/Week change -0.8%
– Store Sales, Year/Year +4.5%

Redbook (week ended 5/12)
– Store Sales, Year/Year +3.7%

– It is not the flat fundamentals which will drive rates but rather the perception and reaction to the complex EU situation.

Empire State Manufacturing (May 2012)
– Index of manufacturing conditions in NY region rebounded to 17.1 after diving to 6.56 April
– Zero is the dividing line between expansion and contraction
Full Report and chart below

$XHB, $HD, $LOW, $XRT