Rate spike takes a (slight) breather

The May rate spike got brief relief this morning as mortgage and Treasury bonds rallied initially, but they’ve had trouble holding gains as the day moves on. But the 10yr Note yield (which serves as a benchmark for the mortgage bonds that lenders use to price consumer rates) is currently holding at 1.95%, providing some support from a further rate spike. Today anyway. Release of the May 1 FOMC minutes next Wednesday is a big day for rate markets (more).

A rundown of today’s U.S. economic fundamentals is below.

MBA Purchase Applications (week ended 5/10/2013)
– Purchase Index Week/Week  -4.0%. Previous weeks were +2.0%,-1.4%, +0.3%, and +4.0%.

– Refinance Index Week/Week -8.0 %. Previous was +8.0%, +3.0%, +0.3%, +5.0% and +6.0%.

– Composite Index Week/Week -7.3%. Previous was +7.0%, +1.8%, +0.2%, +4.8%, +4.5%.

– The dip in refinancing is, as always, driven by increased rates.  The Purchase Index only backs off the previous gain and could indicate that the purchase market is improving rather than booming.  Tightened mortgage lending standards are subduing any increases purchases.  It is the Purchase Index which is the important macroeconomic indicator because homebuying spurs consumer spending.

NAHB Housing Market Index (May 2013)
– Index is 44. Previous was revised down to 41. 

– Improvement over last month’s dip but 50+, which is level considered to be healthy market, is still elusive

– 50 is dividing line between positive and negative sentiment

– Last 50+ reading was April 2006, the tail end of the housing boom

– Last month NAR (National Association of Realtors) indicated that supply was 17% below the previous year.  If supply is low and if prices have increased then there should be more home building.

Full report is here.

– Below is table from 1985 to PRESENT

NAHB_Builder_Confidence_1985_to_May_2013

Producer Price Index  (April 2013)
– PPI Month/Month -0.7%

– PPI Year/Year 0.7%

– PPI core (less food & energy)  Month/Month  0.1%

– PPI core (less food & energy)  1.7%

– Both food and gas prices down. The important datum is core and it is sitting pretty.

Industrial Production (April 2013)
– Production Month/Month -0.5%. Previous was +0.4%.

– Capacity Utilization Rate 77.8%. Previous was 78.5%. –

– Manufacturing Month/Month -0.4%. Previous was -0.1%.

– That data is ugly and indicative of the continued disappearance of domestic manufacturing.

Empire State Manufacturing Survey  (May 2013)
– General Business Conditions Index -1.43.  Previous was 3.05.

– I am not even sure why we continue to look at this.  New York State used to have many cities where manufacturing was big.  This decline started decades ago.
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