The Week Ahead – Bill Godfrey, EVP Capital Markets

Fannie Mae’s Commentary,

Treasuries and mortgages look to open higher this morning as equity futures are pointing lower on speculation that U.S. job reports later this week will be disappointing.  Asian and European stocks fell overnight, propping up 10yr notes.  Additionally, Japan sold Yen in the foreign-exchange market, raising expectations that the proceeds will be used to purchase Treasuries as they continue to be viewed as the safest assets.

Friday, treasuries rose breaking the two day slide as concern that European officials may need to take further steps to tame the region’s debt crisis repressed the recent investor demand for equities.  In terms of economic releases, Friday’s Sep. Personal Income rose 0.1% versus expectations of an increase of 0.3%, and Sep. Personal Spending came in at consensus rising 0.6%.  The Oct. University of Michigan Survey of Consumer Confidence Sentiment registered a reading of 60.9 slightly beating expectations of an increase to 58.0. The Dow rose 0.18% to 12,231 and the S&P rose 0.4% to 1,285.  For the day the 2yr was up 1/32 (0.293), the 5yr was up 9/32 (1.135), and the 10yr was up 17/32 (2.324).  Mortgages initially opened 2 ticks tighter to swaps on overseas buying and never looked back.  Real money, fast money, overseas, and the Fed all bought MBS as buyer’s outnumbered sellers roughly by a 6:1 ratio.    The belly of the stack (4.0 & 4.5’s) performed the best, while 3.5’s underperformed.   FN 30YR 4.0’s ended the day roughly 4 ticks tighter to swaps on approximately $1.0 bln in origination.  Friday’s 4:45pm closing MBS prices were; FN 30YR 15+/32.

Economic Calendar:

 

Date Time

Event

 

Survey

Actual

Prior

Revised

10/31/2011 09:45

Chicago Purchasing Manager

OCT

59

– –

60.4

– –

10/31/2011 10:30

Dallas Fed Manf. Activity

OCT

-5

– –

-14.4

– –

11/01/2011 10:00

Construction Spending MoM

SEP

0.30%

– –

1.40%

– –

11/01/2011 10:00

ISM Manufacturing

OCT

52

– –

51.6

– –

11/01/2011 10:00

ISM Prices Paid

OCT

55

– –

56

– –

11/01/2011 17:00

Total Vehicle Sales

OCT

13.20M

– –

13.04M

– –

11/01/2011 17:00

Domestic Vehicle Sales

OCT

10.30M

– –

10.17M

– –

11/02/2011 07:00

MBA Mortgage Applications

28-Oct

– –

– –

4.90%

– –

11/02/2011 07:30

Challenger Job Cuts YoY

OCT

– –

– –

211.50%

– –

11/02/2011 08:15

ADP Employment Change

OCT

100K

– –

91K

– –

11/02/2011 12:30

FOMC Rate Decision

2-Nov

0.25%

– –

0.25%

– –

11/03/2011 08:00

RBC Consumer Outlook Index

NOV

– –

– –

39.2

– –

11/03/2011 08:30

Nonfarm Productivity

3Q P

2.80%

– –

-0.70%

– –

11/03/2011 08:30

Unit Labor Costs

3Q P

-0.50%

– –

3.30%

– –

11/03/2011 08:30

Initial Jobless Claims

29-Oct

400K

– –

– –

– –

11/03/2011 08:30

Continuing Claims

22-Oct

3700K

– –

– –

– –

11/03/2011 09:45

Bloomberg Consumer Comfort

30-Oct

– –

– –

-51.1

– –

11/03/2011 10:00

ISM Non-Manf. Composite

OCT

53.6

– –

53

– –

11/03/2011 10:00

Factory Orders

SEP

-0.10%

– –

-0.20%

– –

11/03/2011

ICSC Chain Store Sales YoY

OCT

5.20%

– –

5.50%

– –

11/04/2011 08:30

Change in Nonfarm Payrolls

OCT

95K

– –

103K

– –

11/04/2011 08:30

Change in Private Payrolls

OCT

125K

– –

137K

– –

11/04/2011 08:30

Change in Manufact. Payrolls

OCT

4K

– –

-13K

– –

11/04/2011 08:30

Unemployment Rate

OCT

9.10%

– –

9.10%

– –

11/04/2011 08:30

Underemployment Rate (U6)

OCT

– –

– –

– –

– –

11/04/2011 08:30

Avg Hourly Earning MOM All Emp

OCT

0.20%

– –

0.20%

– –

11/04/2011 08:30

Avg Hourly Earning YOY All Emp

OCT

1.90%

– –

1.90%

– –

11/04/2011 08:30

Avg Weekly Hours All Employees

OCT

34.3

– –

34.3

– –

11/04/2011 08:30

Chg in Household Survey Emply

OCT

– –

– –

398

– –

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