Waiting on the Feds

Thursday, September 13, 2007

ECONOMIC DATA / NEWS

When it comes to economic data, it’s all about perspective.  Weekly jobless claims were 4000 higher last week than the previous week.  Plus, 319,000 is a good 15,000 more jobs than where the four-week average was at just a month ago.  However, because it beat estimates of 325,000, traders saw this as an upbeat sign.  This is a number that we personally believe will be rising over the next few months, so it is nothing to write home about.  Furthermore, we can’t ignore the fact that it was still an increase from the previous month.  And with countless layoffs being announced every week, there is plenty of support for the notion that the numbers will climb higher.

One of those companies announcing many of those layoffs, Countrywide, is getting a transfusion of cash.  After borrowing $11.5 billion last month, the company has just increased their credit line by $12 billion from existing and new lenders.  This offers the company a lot more liquidity, which could lead to a broader repertoire of products in the future.

TECHNICAL ANALYSIS

It’s another day of red for the bond charts.  The FNMA 30-year 6.0% is down 15bp to 100.25.  It is perched atop the 10-day moving average, but there is enough momentum to push it to the 200-day moving average at 100.13.  We are expecting a rally around that point, if not before.  As we get closer to the Fed meeting, the markets should start to level off.

Treasuries are unwinding a month long string of gains, similar to what happened last month.  The 10-year yield is up to 4.47%.  There is now a chance that the yield could to the 25-day moving average, currently at 4.58%.  However, it should turn around prior to that, because the Fed meeting is coming up on Tuesday.

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