Headline News and Market Report

“Bond Market News and Perspective for Mortgage Professionals”

Thursday, March 12, 2009

Retail Sales Decline 0.1% in February, Less Than Forecast and Showing Some Stabilization, led by the slump in demand for cars, following a revised 1.8 percent jump in January. Excluding automobiles, sales unexpectedly climbed 0.7 percent. Retail sales in January were revised up sharply, surging 1.8% instead of rising by 1.0% as originally reported. Automobile and parts sales plunged 4.3% in February. Excluding autos, all other sales climbed 0.7% -- much better than the 0.1% gain expected by economists. Ex-auto sales in January had gone up an upwardly revised 1.6% -- following five straight, large drops. Gas station sales gave a lift to the overall retail number. Last month, gasoline station sales climbed 3.4%. Gas sales rose 2.8% in January. Stripping away sales at gas stations, demand at all other retailers decreased 0.4% in February.

Initial Jobless Claims Rose 9,000 to 654,000 Last Week. The 4-week moving average was 650,000, an increase of 6,750 from the previous week's revised average of 643,250. The number of people staying on benefit rolls rose in the previous week by 193,000 to a record 5.317 million.

Treasuries Are Little Changed Before $11 Billion 30 Year Bond Auction and as retail sales fell less than forecast. The long bond was the biggest loser along the Treasury curve Thursday morning. The Treasury Department will sell the 30-year bond at 1 p.m. EDT, the final leg of this week's $63 billion government bond supply. Supply pressure has also mounted from the corporate sector as they compete with the U.S. government for loans from investors. Other maturities, including the 10-year note, also gave up an early rally from soft equities. Bonds rebounded late Wednesday afternoon as bargain-hunters returned following the $18 billion 10-year note auction. The demand pushed down the yield on the 10-year note below 3% again, a key technical level.

Foreclosure Filings in U.S. Jumped 30% in February with A total of 290,631 homes received a default or auction notice or were seized by the lender. Some of the top U.S. lenders own as many as 700,000 foreclosed homes they have yet to offer for sale. The banks may be waiting to see how U.S. government plans develop before selling the properties. The combined percentage of loans in foreclosure or at least one payment past due in the fourth quarter was 11.18 percent, the highest on record. The percentage of loans 60 days past due and 90 days or more late also were at record levels. Nevada, Arizona, California post top state foreclosure rates and California, Florida, Arizona post highest foreclosure totals. Other states with foreclosure rates ranking among the nation’s 10 highest were Florida, Idaho, Michigan, Illinois, Georgia, Oregon and Ohio.

Mortgage Investors Call for Changes in Rescue Plan. Some investors say they are contemplating legal action because they think the administration's plan and legislation before Congress would violate their rights. They are particularly concerned about measures that would prevent lawsuits against mortgage servicers, which collect loan payments for the investors and are responsible for modifying loans with homeowners.

Preventing the Next Fire While This One Blazes. The worst financial crisis since the Depression isn't over, yet it's time to put the best brains to work at reconstructing the financial regulatory structure so we don't go through this again. Trying to wait until the fire is out will yield one of two bad outcomes: a simple-minded, myopic rush to regulation that will make the financial system no safer and the world economy worse off, or talk about "reform" that fades into inaction. Beginning the renovation of regulation will help speed the end of this painful episode.