Economic Highlights for the Week Ending February 24, 2006

[Adam in CO]

Monday, February 20th
PRESIDENTS DAY
All Markets Closed

Tuesday, February 21st
Recent economic data that points toward a significant first quarter rebound and Fed Chairman Bernanke's upbeat assessments of the economy in testimony last week firmed rate hike expectations this week. Fed funds futures traders are pricing in nearly a 100% probability of a quarter point rate hike in March and roughly a 70% chance of another one in May. Two more rate hikes would bring the fed funds target rate to 5.0%, well within the zone economists would consider neutral.
The index of leading economic indicators rose 1.1% in January the largest jump in seven months. 6 of the 10 index components gained with particular strength in jobless claims, building permits, vendor performance and money supply. The level of the index suggests economic growth accelerated in the first quarter and will continue to expand in the next six to nine months.

Wednesday, February 22nd
The consumer price index rose 0.7% in January, higher than expected and due to a 5.0% jump in energy prices. But the outsized gain follows declines in headline consumer prices in the previous two months. Excluding energy and food costs, core consumer prices rose 0.2% on the month and are up 2.1% on the year.
The MBA mortgage applications index rose 0.8% to 578.5% for the week that ended February 17. Purchase applications were up 4.3% on the week but fell 2.2% on the year. Home buying has clearly peaked and is now trending lower. Refinance applications fell 4.0% for the week and are down a sizable 37.9% for the year. Higher mortgage rates continue to quash profitable refinancing opportunities.
The Treasury's auction of $22 billion in 2-year notes was met decent demand today. The notes drew a high yield of 4.689% and received a 2.24 bid-to-cover ratio compared to 2.11 at last month's auction. 2-year yields are at their highest level in five years as investors anticipate further Fed rate hikes. Treasuries rose on the tame core consumer inflation data Wednesday and remained higher after the auction. In late trading the 10-year note was up 11/32 to 99-25/32 to yield 4.52%.

Thursday, February 23rd
Jobless claims fell unexpectedly last week indicating continued strong conditions in the labor market. Jobless claims fell 20k to 278k for the week that ended February 18. The low level of claims is consistent with monthly payroll growth of 200k or more. Also, the unemployment rate should remain at or near its current low level of 4.7%.
The Treasury auctioned $14 billion in 5-year notes today with a high yield of 4.622% and a bid-to-cover ratio of 2.18 compared to 2.10 in January. Indirect bidders which include foreign central banks accounted for just 21.3% of the sales, down from 28.5% last month. The auction results were weaker than expected. Treasuries fell today with the 10-year note down 8/32 to 99-17/32 to yield 4.55%.
Mortgage rates eased for the first time in five weeks on contained inflation expectations. 30-year fixed rate mortgages averaged 6.26% this week compared with 6.28% last week according to Freddie Mac's mortgage market survey. Economists at Freddie Mac expect mortgage rates to fluctuate but remain near current levels over the long term.

Friday, February 24th
New orders for durable goods plummeted 10.2% in January based on a 31.2% decline in demand for transportation equipment, mainly civilian aircraft. Excluding the very volatile transportation component, durable goods orders gained 0.6% last month. After a very strong fourth quarter, demand for airplanes and cars corrected in January. Gains outside of transportation indicate strong demand for other big ticket items, suggesting healthy capital spending going forward.


Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 11061.85 11115.32 -53.47 or -0.48%
NASDAQ 2287.04 2282.36 +4.68 or +0.20%



WEEK IN ADVANCE
With future Fed moves increasingly dependent upon the data, upcoming economic releases become all the more important. Next week's calendar is quite full with housing statistics, personal income and spending figures, consumer attitudes and the first revision to Q4 GDP. Further confirmation of a strong first quarter rebound, even as the housing market slows suggests more rate hikes are probably on the way.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 7.50 6.50 5.50
Fed Discount 5.50 4.50 3.50
Fed Funds 4.50 3.52 2.52
11th District COF 3.296 2.676 1.811
10-Year Note 4.57 4.20 4.28
30-Year Treasury Bond 4.52 4.37 4.63
30-Yr Fixed (FHLMC) 6.26 5.77 5.69
15-Yr Fixed (FHLMC) 5.89 5.35 5.22
1-Yr Adj (FHLMC) 5.32 4.56 4.16
6-Mo Libor (FNMA) 4.8126 3.9235 2.9582
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco




--------------------------------------------------------------------------------

[Adam in CO]

Monday, February 20th
PRESIDENTS DAY
All Markets Closed

Tuesday, February 21st
Recent economic data that points toward a significant first quarter rebound and Fed Chairman Bernanke's upbeat assessments of the economy in testimony last week firmed rate hike expectations this week. Fed funds futures traders are pricing in nearly a 100% probability of a quarter point rate hike in March and roughly a 70% chance of another one in May. Two more rate hikes would bring the fed funds target rate to 5.0%, well within the zone economists would consider neutral.
The index of leading economic indicators rose 1.1% in January the largest jump in seven months. 6 of the 10 index components gained with particular strength in jobless claims, building permits, vendor performance and money supply. The level of the index suggests economic growth accelerated in the first quarter and will continue to expand in the next six to nine months.

Wednesday, February 22nd
The consumer price index rose 0.7% in January, higher than expected and due to a 5.0% jump in energy prices. But the outsized gain follows declines in headline consumer prices in the previous two months. Excluding energy and food costs, core consumer prices rose 0.2% on the month and are up 2.1% on the year.
The MBA mortgage applications index rose 0.8% to 578.5% for the week that ended February 17. Purchase applications were up 4.3% on the week but fell 2.2% on the year. Home buying has clearly peaked and is now trending lower. Refinance applications fell 4.0% for the week and are down a sizable 37.9% for the year. Higher mortgage rates continue to quash profitable refinancing opportunities.
The Treasury's auction of $22 billion in 2-year notes was met decent demand today. The notes drew a high yield of 4.689% and received a 2.24 bid-to-cover ratio compared to 2.11 at last month's auction. 2-year yields are at their highest level in five years as investors anticipate further Fed rate hikes. Treasuries rose on the tame core consumer inflation data Wednesday and remained higher after the auction. In late trading the 10-year note was up 11/32 to 99-25/32 to yield 4.52%.

Thursday, February 23rd
Jobless claims fell unexpectedly last week indicating continued strong conditions in the labor market. Jobless claims fell 20k to 278k for the week that ended February 18. The low level of claims is consistent with monthly payroll growth of 200k or more. Also, the unemployment rate should remain at or near its current low level of 4.7%.
The Treasury auctioned $14 billion in 5-year notes today with a high yield of 4.622% and a bid-to-cover ratio of 2.18 compared to 2.10 in January. Indirect bidders which include foreign central banks accounted for just 21.3% of the sales, down from 28.5% last month. The auction results were weaker than expected. Treasuries fell today with the 10-year note down 8/32 to 99-17/32 to yield 4.55%.
Mortgage rates eased for the first time in five weeks on contained inflation expectations. 30-year fixed rate mortgages averaged 6.26% this week compared with 6.28% last week according to Freddie Mac's mortgage market survey. Economists at Freddie Mac expect mortgage rates to fluctuate but remain near current levels over the long term.

Friday, February 24th
New orders for durable goods plummeted 10.2% in January based on a 31.2% decline in demand for transportation equipment, mainly civilian aircraft. Excluding the very volatile transportation component, durable goods orders gained 0.6% last month. After a very strong fourth quarter, demand for airplanes and cars corrected in January. Gains outside of transportation indicate strong demand for other big ticket items, suggesting healthy capital spending going forward.


Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 11061.85 11115.32 -53.47 or -0.48%
NASDAQ 2287.04 2282.36 +4.68 or +0.20%



WEEK IN ADVANCE
With future Fed moves increasingly dependent upon the data, upcoming economic releases become all the more important. Next week's calendar is quite full with housing statistics, personal income and spending figures, consumer attitudes and the first revision to Q4 GDP. Further confirmation of a strong first quarter rebound, even as the housing market slows suggests more rate hikes are probably on the way.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 7.50 6.50 5.50
Fed Discount 5.50 4.50 3.50
Fed Funds 4.50 3.52 2.52
11th District COF 3.296 2.676 1.811
10-Year Note 4.57 4.20 4.28
30-Year Treasury Bond 4.52 4.37 4.63
30-Yr Fixed (FHLMC) 6.26 5.77 5.69
15-Yr Fixed (FHLMC) 5.89 5.35 5.22
1-Yr Adj (FHLMC) 5.32 4.56 4.16
6-Mo Libor (FNMA) 4.8126 3.9235 2.9582
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco




--------------------------------------------------------------------------------

[CO Hummer]

I agree with most of what you said, except for some of it.

[ZigsRig]

That sir... was a PAD post!

[CO Hummer]

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by ZigsRig:
That sir... was a PAD post! </div></BLOCKQUOTE>

Zig,
I mostly agree with you, but not completely.

[ZigsRig]

HAHA........... PAD

[alldunn]

I do NOT agree with any of you.

[CO Hummer]

<BLOCKQUOTE class="ip-ubbcode-quote"><div class="ip-ubbcode-quote-title">quote:</div><div class="ip-ubbcode-quote-content">Originally posted by ZigsRig:
HAHA........... PAD </div></BLOCKQUOTE>

I am funny, but not that funny.