Feb 25. Bernanke confirms low rates/ New Home Sales Plunge
Bernanke says rates to remain low, cited unemployment as a bigger problem than inflation. New Home Sales plunged to 25 year low, notwithstanding the homebuyer tax credit. Fed wants to gauge the effect of ending MBS purchases (thought to be modest). At the same time this week’s treasury sales are not causing any type of rate back-up, thanks to increased direct bidding. 7 year note today.
–New lows in EDH10/EDM10 spread at 9.5 and EDM/U10 at 18.0; the market agrees that rate hikes are not likely. However, red/gold pack spread again steepened, gaining over 3 bps.
–This morning attention is again focused on Greece. EUR/JPY has fallen to a new low around 120.60 (Mar futures), down over one big figure. The US has its own share of struggling states. CA delayed a $2 B bond sale yesterday (CA CDS around 260). NY CDS also jumped yesterday according to reports. NY transit (MTA) likely to be forced to again raise fares as money problems intensify. IL has started a website to allow public discussion about how to plug the budget deficit.
–News today includes Durable Orders expected +1.5% from +0.3. Job Claims expected 460k. Bernanke wraps up testimony. Health Care summit to be televised today…I’m guessing it won’t be confidence inspiring.
