This morning was the release of the S&P Case Schiller Home Price Index. For November, the numbers show more weakness in home prices. On a non-seasonally adjusted basis, the 20 city index fell .97% with the majority of metropolitan areas dropping more than 1.0%. Prices are 1.59% lower in November versus year-ago levels. Factoring in seasonal adjustments, prices fell .54% month over month and 1.61% year over year. Among the 20 metropolitan areas that suffered greater than 1.0% declines month over month in November were Atlanta (-2.13%), Chicago (-1.80%), Minneapolis (-1.76%), Phoenix (-1.55%), New York (-1.53%), Portland (-1.34%), San Francisco (-1.29%), Detroit (-1.25%), Miami (-1.18%), Seattle (-1.16%), and Cleveland (-1.05%). The release this morning was largely in line with expectations and did not have much effect on our markets. Today begins the FOMC’s first meeting of 2011 with their rate decision coming in tomorrow around 1:15pm CST. We expect rates to be unchanged and QE2 to continue on as scheduled. The president will deliver his State of the Union address tonight at 8pm CST. He is expected to focus on U.S. competitiveness, spending, and jobs. The Treasury just auctioned off $35bln 2-year notes and the issue stopped just about “on the screws” at .65%. The auction had a nice bid to cover ratio of 3.47, which is right around the six-month moving average of 3.51. Indirects took about 27% of the issuance. We are now pushing through resistance at 120-21 and a close at this level or better would suggest the bulls are back in charge. However, we don’t expect a large move to the upside (better rates) with the release of the FOMC statement tomorrow. Dow is off 48 points, mortgage backs are rallying up 4s, and the 10yr is bouncing to better levels at 3.34%.
Joe Webb
VP Trading, Pipeline Management
PrimeLending, A Plains Capital Company
18111 Preston Rd, Ste 900
Dallas, TX 75252
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