Bond Markets Stronger Overnight, Unchanged After Data
A concept from this morning's 'day ahead' is currently playing out so well that it bears repeating. Here's the paragraph in its entirety:
The conclusion--if there is a relevant one to be made--is that the reaction to today's housing data will be 'interesting' if there is any reaction. If the data is much weaker, and stocks continue to rally while bonds barely budge, we'd have further confirmation that the weather is postponing honest reflection.
It would be hard to add much more to this morning's analysis. The housing data was indeed weak. Bonds aren't budging and stocks moved off their lows. Here's a run-down of the 8:30am reports:
Housing Starts (New Residential Construction)
- Jan Housing Starts 880k vs 950k forecast, down 16 pct (most since Feb 2011)
- Dec Housing Starts revised to 1048k from 999k
- Permits 937k vs 980k forecast, Dec unchanged at 991k
- Our take on share of market movement: n/a (no movement)
Producer Price Index
- +0.2 vs +0.1 previously
- Core PPI +0.2 vs 0.0
- Core PPI year over year +1.3
- Our take on share of market movement: n/a
If you wanted to stretch to attribute the flatness in the trading reaction to the data, you could probably get away with saying something like "weaker housing offset by higher inflation," but in so doing you'd be giving far more relative credit to producer-level inflation than it has had for several years or that it yet deserves.
Fannie 4.0s are still up 4 ticks (.125) on the day, with all those gains being seen at the open. Similarly, Treasuries are right in line with their stronger opening levels with 10yr yields at 2.685. If there's any inclination peaking through, it's to shy away from any further improvement.
FOMC Minutes at 2pm if anyone cares (and we're not sure anyone will).