The Economy and Bond Market Diary (November 29, 2010)
The 10-year Treasury bond yield closed at 2.87 percent, down 0.17 percent for the week.
The graph below shows initial jobless claims in the U.S. For the latest week ended November 20, the number of claims declined by 34,000 to 407,000, exceeding the consensus forecast which called for a drop to 435,000. This was the lowest level of new claims since July 2008.
Strengths
- Initial jobless claims declined by 34,000 to 407,000 in the week ended November 20, exceeding the consensus forecast which called for a drop to 435,000.
- U.S. GDP for the third quarter was revised up to 2.5 percent from the 2 percent estimate issued last month. The consensus estimate for the third quarter revision was 2.4 percent.
- The Mortgage Bankers Association’s Index of Mortgage Applications for Home Purchases for the week ended November 19 rose 14.4 percent from the prior week. This was the largest percentage gain since November 2008. The refinancing index fell one percent.
Weaknesses
- Sales of new homes in October declined 8.1 percent from September to a 283,000 annual rate. Economists had expected an increase to 312,000.
- Durable goods orders fell 3.3 percent in October from the September level, below the consensus forecast of a 0.1 percent increase. Orders for capital goods excluding transportation decreased 2.7 percent. The forecast was an increase of 0.6 percent.
- The FHFA House Purchase Price Index declined 1.6 percent on a seasonally-adjusted basis in the third quarter from the second quarter. The consensus forecast was for a 1.1 percent decrease.
Opportunities
- Inflation is unlikely to be a problem for some time and this gives central bankers and other policymakers around the world room for expansive policies.
Threats
- The housing foreclosure problems currently being experienced by the large banks and other mortgage lenders threatens to delay the market clearing process in the housing market, thereby serving as a continuing drag on the economy.
