Syria- Bullish for Bonds?
Geopolitical concerns have resurfaced as the main market
mover as pressure builds on the US to back up its words with action. The
market is clearly in flight to quality mode with the largest percentage moves
in the front end of the curve along with a rise in gold/silver, the yen and the
Swiss franc.
This morning, the S&P/Case Shiller headline hit with
robust growth of 12.1%, pretty much in line with expectations. The
headline numbers have a couple of problems, however. The numbers are for
June, clearly a time when potential buyers rushed into contracts as mortgage
rates rose. Also, the monthly number, despite the rush to buy, missed
with a 0.89% increase when 1.00% was expected. That miss annualizes to
1.32%. The miss is also the second consecutive miss. If it were just a
two-month miss, this would be not be big news. The problem is that it comes in
the context of falling Mortgage Bankers Assoc. numbers. Bloomberg put
together a nice chart (below) showing the decline in the applications index
to the lowest level in two years. The chart shows the plunge in the index
as interest rates rose over the period. Additionally, the purchases index
rose from a low of 157.9 last August to a high of 220.60 at the beginning of
May (a 39.7% increase in 9 months). Since the peak, the index has
declined 16% to 184.90. So, we have lost 40% of the recovery in the
purchase index in the last 3 months…ouch!
