FRIDAY FINANCIALS by Jed Marquis

Posted by on Friday, August 24th, 2012 at 4:28pm.

15 year rates 2.875%

As we talked about Wednesday, all the “great” economic news from the end of last week and the first part of this week, really isn’t so great.  The investors were really looking at silence  from across the pond and some homegrown headlines as good news for the economy while the underlying economics weren’t so good.  On Wednesday, the 10 year T-Bill hit a high of 1.84% and mortgage rates hit 3.75%.  Today the T-bill dropped to 1.63% before climbing back to 1.68%. For mortgage rates, that means we dropped back to 3.5% on the 30 year.

Here’s what’s happening:
Jobless claims came in higher than expected showing more weakness in the economy.

New home sales were stronger than expected in July but well within the consensus range, so somewhat neutral to the economy.

BUT!!!  Durable Goods Orders came in way above the estimates. The consensus estimate was up 1.9%, the actual was up 4.2%.  We’re manufacturing all kinds of things! So that should be bad for interest rates.  BUT, when large orders are removed, this time aircraft orders, the consensus was supposed to be up 0.4%.  Reality is the orders minus transportation were down 0.4% and last month’s numbers were revised down from down 1.1% to down 2.2%.  A double whammy.  The reality is if we take cars and aircraft out of the past two months, the manufacturing economy is doing very poorly.  Very bad for the economy but good for interest rates.

Lastly, as Europe starts to come back from their August vacation, the little bit of news coming from Europe isn’t good.  The solution to the crisis and recession avoidance doesn’t appear to be on the horizon.  And China had another month of economic decline. 

Next week should be interesting.

In Boulder tomorrow is the Pro cycling Challenge and it should be a fantastic Saturday.  Have a great weekend.

Leave a Comment