Global Markets Update - April 7 2009
Provided by MF Global
The European DJ Stoxx 50 this morning is down -0.55% and June S&Ps are down -3.80 points (-0.47%). The Asia-Pacific stock markets today closed mostly lower with Japan (-2.69%), Hong Kong (-3.04%), China (-3.79%), Taiwan (-2.39%), Australia (-2.34%), Singapore (-1.02%), South Korea (-3.36%), India (+1.97%). Global stock markets are lower today after Alcoa, the largest US aluminum producer, posted its second straight quarterly loss and spurred concern the global economy is still deteriorating. German factory orders fell a larger-than-expected -3.5% m/m in Feb, the sixth straight monthly decline, and fell -38.2% y/y, the largest y/y decline on record (data back to Jan 1992). The CEO of OAO Sberbank, Russia's biggest bank, said delinquent loans in Russia are rising by 20% a month and now represent 3.7% of all Russian bank loans. The Nikkei newspaper reported today that Japan's government may now spend about 15 trillion yen ($150 billion), or 3% of total Japanese GDP, in its next economic stimulus package. The Japanese economic picture continues to deteriorate with Japan's exports plunging a record -50.4% in Feb y/y while Japan's bankruptcies in Mar surged +14.1% y/y to a six-year high.
Mortgage apps – The latest weekly MBA mortgage applications rose +4.7% to a three-month high, with the purchase sub-index rising +11% and the refinancing sub-index climbing +3.2%. The 30-year mortgage rate in the week ended April 2 fell by 7 bp to a new record low of 4.85%. The 30-year mortgage rate has fallen by about one-quarter point so far in reaction to the FOMC’s announcement on March 18 that it was substantially expanding its mortgage security purchase program (see below). The refinancing index rose to a three-month high of 6,813.5 indicating a very active refinancing market. Meanwhile, the purchase sub-index rose to 297.7, although a 2-1/2 month high, is just mildly above the 8-year low of 235.9 posted in the first week of February, indicating continued weak home buying activity. The high level of refinancing activity, however, is very positive for the economy since lower mortgage payments mean at least some US consumers have more cash in their pockets each month.
FOMC minutes – The minutes will be released today from the March 17-18 FOMC meeting. The FOMC at that meeting announced that it would expand its purchase program for mortgage securities to $1.25 trillion from $500 billion and double its purchase program of Fannie/Freddie/Ginnie debt to $200 billion from $100 billion. The FOMC also announced its quantitative easing program of buying $300 billion of T-notes and bonds over the next 6 months. The FOMC at that meeting left its funds rate target unchanged at the range of zero to 0.25%. The markets will assess the minutes to see whether there was any opposition to those moves by a minority of members and whether the FOMC seems inclined to expand the quantitative easing program beyond 6 months.
3-year T-note auction – The Treasury today will sell $35 billion in 3-year T-notes. The size of today’s 3-year is up $1 billion from the $34 billion auction in March and is up sharply from the $14 billion auction seen about a year ago in May 2007. Today’s 3-year issue was trading at 1.36% in when-issued trading late yesterday afternoon. The 12-auction averages for the 3-year are as follows: 2.41 bid cover, $222 million in non-competitive bids, 4.0 bp tail to the median yield, 11.3 bp tail to the low yield, and 43% taken at the high yield. The 3-year is a little below-average on the popularity scale with foreign central banks. Indirect bidders, a category that is mainly composed of foreign central banks, have taken an average of 30.1% of the last twelve 3-year auctions, which is mildly below the average of 33.6% across all recent Treasury coupon auctions. However, indirect bidders have been very active at the last two 3-year auctions, taking 40.3% of the March auction and 44.8% of the February auction.
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