Coronavirus Concerns Pushing Rates Slightly Lower

Stock indexes traded higher in the overnight futures. Interest rates were choppy overnight, at 9:00 am ET the 10 yr at 1.73% -1 bps. Overnight the 10 yr increased to 1.76% +3 bps from the US close yesterday but then fell back to 1.71%. MBS prices early this morning +6 bps from yesterday’s close.

There is one economic measurement today. The Jan PMI composite flash index was expected at 52.3, as released 53.1, manufacturing though at 51.7 on estimates of 52.2. This week had just one key report, Dec existing home sales that were stronger than forecasts.

The Coronavirus still closing much of Asia. The Shanghai stock market is closed indefinitely as China moves to contain the fast-spreading illness that has now killed 25 in China. The concern has supported lower global interest rates with safety moves. Worries continue that the virus may look like the SARS virus 17 yrs ago that killed over 800 people.

Today is the final day the Democrats have to present their case. Tomorrow the Republicans will have their 24 hours of arguments. Most of the Senators are walking in a daze after Democrat leaders kept them in session until 2 am. They were sleeping at their desks, walking around as if bored, and running to cell phones in the cloakroom.

Global data today, in Japan no inflation, not a shock, there hasn’t been any inflation for 30 yrs no matter what the BofJ and the governments have tried. The Bank of Japan’s December Minutes noted that consumer inflation expectations have declined since the sales tax hike in October. Japan’s December National CPI ticked up 0.1% m/m (last 0.2%), increasing 0.8% yr/yr (last 0.5%). National Core CPI rose 0.7% yr/yr, as expected (last 0.5%). Flash January Manufacturing PMI rose to 49.3 from 48.4 while flash January Services PMI rose to 52.1 from 49.4. Eurozone’s flash January Manufacturing PMI rose to 47.8 from 46.3 (expected 46.8) while flash Services PMI dipped to 52.2 from 52.8 (expected 52.8). Germany’s flash January Manufacturing PMI rose to 45.2 from 43.7 (expected 44.5) while flash Services PMI rose to 54.2 from 52.9 (expected 53.0).

Source: TBWS