By now you know Crimean voters
voted to join Russia in the election held yesterday.
About 97 percent of the voters in the southern Ukraine region who took part
backed joining Russia, preliminary results showed. The Ukrainian government,
the EU and the U.S. consider the vote illegal, while Russia said it “fully met
international norms.” The Kremlin has deployed about 60,000 troops along the
Ukrainian border, the government in Kiev said. “Russia’s actions are dangerous
and destabilizing,” the White House said in a statement. “Military intervention
and violation of international law will bring increasing costs for Russia.” No
violence took place; now the US and Europe are going to sanction Russia in
various ways, freezing bank accounts and passport restrictions according the
Administration, and likely a lot more. In Europe there is less willingness to
come down hard on Russia because many of the EU countries get their natural gas
frm Russia. Crimea's parliament voted to proclaim the region an independent
state and formally seek Russia's permission to rejoin the country as a
republic, it said on its website.
This week the FOMC meeting will
dominate; the meeting begins tomorrow and concludes Wednesday afternoon
with the policy statement and Janet Yellen’s first press conference. The
overwhelming consensus is that the Fed will taper another $10B that will reduce
the monthly bond and MBSs to $55B a month from the original $85M per month. The
Yellen press conference, her first, may provide additional information about
the Fed’s outlook for the economy; likely though her responses will lead to
even more speculation.
Last week markets were totally
focused on the Russian/Crimean vote that occurred yesterday with a strong vote
to become a Russian state. The stock market took
big hits with the DJIA down almost 400 points and a big decline in US
treasuries on safety buying dropping the 10 yr note 14 bps points in rate. MBSs
increased 49 basis points; most of the rate market buying was confined to
treasuries. This morning Pres. Obama signed an executive order that places
travel sanctions on many of Russia’s politicians and froze some assets held in
US banks. Not much, but a start; (actually kind of soft) the election was
peaceful and so far no Russian troops moving closer to the Ukraine. Markets
this morning are not reacting the way many expected, we noted Friday that the
situation may have been a little too exaggerated. Markets have turned attention
now to the FOMC meeting and Yellen’s press conference on Wednesday. Stocks
recovering from last week’s strong selling; the bond market moving higher in
rate on universal belief the Fed will chop another $10B frm the monthly
purchases. Russia will stay in the background but so far there has been
absolutely no additional negative reaction to the situation.
The bond market is still holding a
slight bullish bias based on models and moving averages as well as the 14
day relative strength index. That said, no matter
what the momentary fundamental influences that have swung prices back and
forth, the broader picture is that US interest rates have not changed much for
the last six weeks. 20 basis points on the 10 yr with the majority of trading
within a 10 bp range. MBS prices within a 100 bp price range that translates to
about 6 bps in rate.
I am suggesting to float your rate if you are not planning on closing this week. I will be suggesting to lock Wednesday however ahead of the "GAME CHANGER" jobless claims.
Happy St. Patti's Day!
Tuesday;
8:30 am Feb housing starts and permits (starts +3.3%, permits +2.4%)
Feb CPI (+0.1%, ex food and energy +0.1%)
10:00 am FOMC meeting begins
Wednesday,
7:00 am weekly MBA mortgage applications
8:30 am Q4 current acc’t balance (-$88.1B)
2:00 pm FOMC policy statement
2:30 pm Janet Yellen press conference
Thursday,
8:30 am weekly jobless claims (+10K to 325K)
10:00 am Feb existing home sales (-0.4%)
Philadelphia Fed business index (+3.0 frm -6.3)
Feb leading economic indicators (+0.3%)
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