EFFECTIVE 5:00 PM EASTERN TIME: 11/06/97 /_________________\
KEY INDICATOR CURRENT CHANGE FROM LAST YIELD |6-Mth CD :5.71% *|
--------------- --------- ---------------- ------ |11th COFI:4.941% |
3-month T-Bill: 5.16 - up 6 basis pnts-5.30% |6Mo-LIBOR:5.805% |
10 Year T-Note:*101 25/34 - up 6/32 -5.88% |1Yr TBill:5.35% *|
Long Bond.....: 102 18/32 - up 14/32 -6.18% |3Yr TBill:5.73% *|
Dow Jones.....: 7683.24 - down 9.33 |5Yr TBill:5.78% *|
FHLMC 60 day..: 7.40% - up from 7.39% (11/05) |10YrTBill:5.90% *|
FNMA 60 day...: 7.37% - from 7.37% (11/05) |30YrTBond:6.22% *|
*new issue |PRIME - 8.500%|
Todays Interest Rate/Loan Fee Pricing Trend: |DISCOUNT - 5.000%|
*** STABLE *** |FED FUNDS- 5.50 |
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* Wkly Average ending 10/31
10:45AM EST: Stocks and Bonds are both down moderately in early trading following a steady overnight session, but hit in the last few minutes after the Bank of England (BOE) surprised the market by hiking the base rate by 25 bp to 7.25% (more on this below). The market showed no reaction to a much higher than expected report on weekly jobless claims as the BOE announcement gets top billing. There are no more major economic reports scheduled for release today.
The Treasury Department will hold the final leg of its quarterly refunding later today, selling $10 billion in 30-Year Bonds. The first two legs on Tuesday and Wednesday came in at or near expectations.
Tomorrow we get the October employment report. The market is looking for the Unemployment Rate to edge down to 4.8%, Non-Farm Payrolls to add 215,000 jobs and Hourly Earnings to increase by 0.3%. Also tomorrow, Fed Chairman Alan Greenspan is scheduled to speak at the Center for Financial Studies in Frankfurt at 8:45AM EST.
The market reacted negatively to the BOE announcement because investors are concerned that if the BOE is willing to step to the plate and tighten just over a week after the Asian turmoil and equity market correction entered the picture, is it possible that other central banks (can you say Federal Reserve) have a similarly sanguine view of these recent events?
While no one expects the Fed to raise interest rates at their next Federal Open Market Committee (FOMC) meeting on November 12th, the BOE announcement muddies the waters a little for their next meeting in December.
The Labor Department reported this morning that Initial Jobless Claims unexpectedly shot up by 16,000 last week to the highest level in nine weeks but remained in a range reflecting a tight labor market. New applications for unemployment insurance totaled a seasonally adjusted 315,000 - the market had forecast 305,000. Still, claims remained below 320,000 for a ninth straight week, the longest such string since a 26-week stretch that ended in February 1989.
The four-week average of new weekly jobless claims was up by 2,750 to 308,250, highest since 308,750 during the period that ended Sept. 27.
Also reported this morning, The Mortgage Bankers' Association new home purchase index, which had dipped from the 220-230 range down to the low 200s in recent weeks, spiked back to 233.9 from 204.3 in the latest week, indicating that home sales activity remains quite firm. The refinancing index rose sharply -- to 1013.4 from 683.1 -- suggesting both that consumers are benefitting from lower rates and that the market is benefitting from flows into Treasuries from mortgage desks looking to offset mortgage prepayment risks.
The U.S. Treasurys market emerged unscathed yesterday from the second leg of the Treasury's refunding to close with higher prices. While traders described the results from the Treasury's $11 billion auction of 10-Year Notes as "sloppy," they said follow-through buying helped support the market. In late trading, the benchmark 30-year bond was up 13/32, lowering its yield to 6.21% from 6.25% late Tuesday.
The average yield on the reopened 10-year note was 5.955%, and the highest yield was 5.967%. The bid/cover of 2.44 was above average. Dealers had hoped that the when-issued 10-year note's yield would edge up to 6% prior to the auction to boost investor demand. The market showed little response to these mostly as-expected results.
In the day's only economic report, Factory Orders posted a better than expected 0.4% increase. But the release had no market impact....