Equity futures are flat this morning ahead of the durable goods report for June and the Federal Reserve’s Beige Book, a summary of regional economies across the country.
Ninety minutes before the opening bell, Dow futures are trading 1 point higher at 10,495 and S&P 500 futures are up 0.25 points to 1111.25.
The 2-year Treasury note is UNCH at 99-31 yielding 0.645%. The benchmark 10-year note is +0-04 at 103-29 yielding 3.036%. The 2s/10s curve is 2bps flatter at 239bps.
The September Delivery FNCL 4.0 is +0-03 at 101-15. The FNCL 4.5 is +0-03 at 103-25. The secondary market current coupon is 1.2bps lower at 3.747%. Yield spreads are wider to start the session.
Key Events Today:
7:00 ― The just-released weekly Mortgage Applications Index, a measure of mortgage loan application volume, decreased 4.4% in the period ending July 23, led by refinancings.
Before the release, economists at Nomura noted that weekly purchases were “extremely low” but that it’s not clear what this means for the home sales outlook.
“The correlation between this index and actual home sales has been poor in recent years,” they noted. “Nevertheless, we believe the distressed level of applications suggests downside risks to sales.”
8:30 ― New orders for Durable Goods in June could have some impact on predictions for second-quarter GDP, which comes out Friday. Economists are expecting new orders to jump 1% in June, reversing the 0.6% drop in May and adding to the 2.9% leap in April. Transportation orders are expected to be a major boost in the month due to strong aircraft orders.
“Excluding transportation, orders will continue to rise but at slower pace, indicating that business demand remains firm,” predicted economists at BBVA. “This report is volatile on a monthly basis, but the year-over-year rate is expected to remain at historically high levels, highlighting the strength of the recovery. An increase in new orders would indicate that industrial production will continue to strengthen in July.”
Economists at Nomura noted that Boeing booked 49 new orders in June compared to just 5 in May.
“This should boost headline durable goods orders,” they said, forecasting that core orders ― nondefense capital goods excluding-aircraft ― rose by 1.0% compared to +3.9% in May.
“Although financial conditions and the outlook for growth have deteriorated, we believe this will likely not affect capital spending for a few more months,” they concluded.
2:00 ― The Federal Reserve’s Beige Book, an anecdotal summary of economic conditions from all 12 regional central banks, may be slightly less watched than usual given that chairman Ben Bernanke testified to Congress last week. Still, the report is always valuable for its close look at each region.
Economists at Nomura Global Economics expect the banks to reiterate that economic activity is growing, albeit at a modest pace.
“We expect a broadly similar assessment in the current report, with perhaps some reference to the fact that the pace of growth in the manufacturing sector has slowed,” they said. “Commentary about price trends will also be interesting to watch, especially given the recent firming in measures of core inflation.”
Treasury Auctions:
- 1:00 ― $37 billion 5-Year Notes
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