A bridge over troubled waters

'A bridge over troubled waters' - I think that would be my summation of our
economic situation at the present time...
Turbulence, unexpected data releases, market volatility, artificially pegged
short rates, debt, debt and more debt...at least it appears that the consumer
(whether forced to or not) has been steadily decreasing their personal debt
levels - now if we could only convince our 'wise and wisdom filled' legislators
(at all levels) to do the same - cut and control spending!
prb

Subject: S&Y PSG Morning Market Update for Thursday February 25th
Date: Thu, 25 Feb 2010 07:17:35 -0800
From: "Stone & Youngberg Portfolio Strategy Group"


* The Treasury market was little changed yesterday as their was no significant economic releases providing an impetus for investors to reassess their views. On the day, the 2-year note was the big mover, with its yield rising 3 basis points to 0.867%. Other yields across the curve changed less than 1 basis point. At the close, the yield on the 3, 5, and 10-year notes was 1.405%, 2.354%, and 3.693% respectively. In overnight trading, yields are lower by 2 to 4 basis points across the curve as weaker equity prices and the ongoing concerns regarding the debt situation in Greece, push investors to the relative safety of U.S. Treasuries.

* This morning the Commerce Department reported that orders for durable goods rose 3.0% in January, driven largely by orders for aircraft which rose 126% on the month. When the impact of aircraft and other transportation related goods are excluded, durable goods fell by a surprising 0.6% in January. Declines were seen across both orders and shipments for non-defense related goods as orders excluding aircraft were down 2.9% and shipments excluding aircraft were down 1.5%. The weak durable goods report underscores a theme we have been advancing that while the economy is slowly recovering from the depths of the recession, the rebound will be tepid by historical standards.

* The Commerce Department also reported this morning that initial jobless claims rose 22,000 to 496,000 last week. The snow storms across the mid-west and east coast were significant contributors to the rise in claims. With the February non-farm payroll report slated for release next week, analysts will be closely reviewing the report for the impact the storms had on the employment data.

* Yesterday, data on new home sales were released by the Commerce Department, showing sales falling to a record low of 309,000 in January. The decline in sales represents an 11.2% decline from December's revised 348,000 in sales. Accompanying the report was data showing that the median sales price for new homes declined 2.4% on a year-over-year basis. The report underscores the fragility of the recovery in housing.
While home prices in most areas are no longer in a "free-fall", support for housing has largely been drawn from government programs such as the home buyer tax credits and the Federal Reserve's MBS purchase program.

* The CEO of Freddie Mac underscored the uncertainties facing the housing market this year in a statement noting "the housing recovery remains fragile, with significant downside risk posed by high unemployment and a potential large wave of foreclosures." The considerable amount of seriously delinquent loans in GSE portfolios, and the GSE's plans to buy those loans out of its guaranteed MBS have weighed on the performance of the mortgage sector, with higher coupon Fannie Mae MBS significantly underperforming the market over the past two weeks.