Rates Hold Lows Despite Better Jobs, Manufacturing

Rates are holding a hair above record lows today as mortgage bonds are flat. Rates drop when bond prices rise, and mortgage bonds have been rallying this week on continued Europe fears.

The Fannie Mae 3.5% coupon, a benchmark most lenders use to price 30yr consumer mortgage rates, is trading +/- 5 basis points today, hovering around the unchanged 102.44 level.

This despite another big decline in jobless claims and another improvement in manufacturing.

On the ‘risk’ side, stocks dropped three days up to today, and the S&P 500 is now up 6 points to a level of 1218.

A full summary of today’s better U.S. economic data is below. And the latest from Europe is IMF managing director Christine Lagarde explaining why Europe’s situation is dire indeed. Despite the modest stock gains, bonds are holding the line given non-U.S. risks.

For now, the good news is improving U.S. data (below) and low U.S. rates.

Initial Jobless Claims
-366,000 for week ended December 10
-Down 19,000 from previous week’s revised 385,000 (was 381k)
-4-week moving average 387,750, down 6,500
-Below 400k signals improving jobs picture
-Lowest level since May 2008
-The holidays can cloud jobs data but this is positive on the surface and trend may be emerging.
More analysis & chart

Inflation: Producer Price Index
-PPI, Month/Month +0.3%
-PPI, Year/Year 5.7%
-PPI less food & energy, Month/Month +0.1%
-PPI less food & energy, Year/Year +2.9%
-Monthly and annual figures flat.
-No inflation threat for now. CPI tomorrow.

Empire State Manufacturing
-December business conditions index rose to 9.5
-Highest manufacturing activity level since May
-Was 0.61 in November, first positive since May, huge jump from October’s -8.48
-0 is dividing line between expansion and contraction
Full report

Philly Fed Manufacturing
-December manufacturing activity index rose to 10.3
-Highest since April, third straight month of growth after 3mo of contraction
-Was 3.6 in October and 8.7 in September
-0 is dividing line between expansion and contraction
Full report