Stone & McCarthy Research. SMRA.com: Main Page

Fixed Income Focus: Testing Record Low Yields...2-, 5- & 7-Yr Preview
Treasury yields were mixed this past week, but the story of the week was the enormous curve flattening and the tremendous long-end rally. The rally pushed the yield on the 10-year note down to a record closing low of 1.70% on Thursday. The prior record low closing yield for the 10-year was 1.72% on September 22 last year, in the aftermath of the FOMC's Maturity Extension Program decision. On September 23, the yield on the then active 10-year - the 2 1/8% of 11/15/21 - fell as low as 1.67% intra-day.

Treasury will come to market in the upcoming week with the $99.0 billion package of month-end 2-year, 5-year and 7-year note auctions. Treasury will auction a new $35.0 billion 2-year note on Tuesday, April 22, a new $35.0 billion 5-year note on Wednesday, April 23, and a new $29.0 billion 7-year note on Thursday, April 24. We expect the Europe/Greece related safe-haven demand for Treasuries should again be a boon for the auctions during the week ahead.
May 18 Fixed Income Focus

SMR US Economic Chartbooks
Please see our Economic Week Ahead Chartbook for a discussion of next week's economic releases provided in a visually friendly format that includes graphs, brief descriptions of SMR's forecasts, and links to detailed data previews. If you missed anything from last week, see our Economic Week in Review Chartbook for a look back at the releases with links to full analyses.
May 18 Economic Research

Thursday Fed Reports on SOMA, the Balance Sheet, and Money Supply
On Thursdays at 16:30 ET, the Federal Reserve releases a variety of data on the System Open Market Account (SOMA) holdings, reserve balances at the Fed, and the money supply. Our calculation for the average maturity in months for the SOMA holdings in the week ended May 16 was up to 102.8 from 101.6 in the prior week. Federal Reserve holdings in the SOMA fell $4.8 billion in the week. The decrease was mainly due to declines in Treasurys (-$4.3 billion) and Maiden Lane LLCs (-$5.2 billion) that was offset by a rise in Agency MBS (+$5.2 billion). In the money supply data for the week ended May 7, M1 decreased $34.0 billion from the prior week, and M2 was down $1.7 billion. Non-M1 M2 was up $32.3 billion billion. The increase was in savings deposits (+$31.0 billion). For details, see our updates on May 17.
May 17 Economic Research

A Full House at the Board of Governors, But Likely Not for Long
The Senate has confirmed the two nominees to the Board of Governors. Jerome Powell will fill the term ending on January 31, 2014, and Jeremy Stein's term will end January 31, 2018. However, current Governor Elizabeth Duke's term expired at the end of January 2012. Now that the Board will have more than the minimum five votes to act in "unusual and exigent" circumstances, she may elect not to linger.
May 17 Federal Reserve

Mortgage Focus: Delinquencies Decline; Inventories Don't
Key Takeaways
-- Mortgage delinquency rates declined in the first quarter. Delinquency rates declined for all stages of delinquency.
-- Declines in early stage delinquencies are contributing to declines in serious delinquencies.
-- The foreclosure start rate declined slightly. Foreclosure starts should pick up going forward.
-- The foreclosure inventory rate will remain elevated for some time, as foreclosure timelines have lengthened. That's not temporary.
-- Progress in reducing foreclosure inventory varies a lot by state; foreclosure inventories are still rising in states with judicial foreclosure processes.
May 16 Mortgages