Mid Missive Market 180...Again

Loads of things have happened in the last two days. In the bond market, Treasuries and in particular MBS took a beating worthy of a red-headed stepchild. The longer dated really bearing the brunt with 2-10s breaking previous record wides and the idea of cheap refinances having serious dispersions cast upon it. Higher mortgage rates to stop the recovery before it’s even got started? Bonds have rallied somewhat in the last 30 mins or so and with that we’ve seen equities actually do something today, rally, because up until then, there was little sign of movement in either direction. I was surprised (no surprise there) to see the market in such relative rude health today given the bond moves, and other negative pieces of news. Let’s run through some of them:

-Jamie Dimon says credit card write offs at WaMu could hit 24% by year end. 24%!! This is huge, to put into context, AMEX and COF etc have had charge offs in the region of 8.5-9.5% with this escalating to the mid teens by year end.

-Visteon goes bust.

-Procter & Gamble in WSJ about a possible imminent and now recent, negative announcement and price cuts.

As an aside, I think this is really interesting…some banks have been lobbying the FDIC to let them participate in the PPIP and buy troubled assets using public money. So buying their own rubbish?? Well not quite, Sheila Bair was questioned on this in a press conference and while she did say banks could not bid on their own assets, the idea of bidding on other banks assets is being looked at. Now, I know we’re no longer allowed to call OPEC a cartel, but here’s a great opportunity for one. BAC overpays for Citi's assets and Citi in turn overpays for BAC’s assets. Genius.

Macro data been a bit better today, certainly at the headline level. Durables was blowout but not surprisingly…there was a downward revision to last month, and a pretty serious one at that. The main beat this month came from Transport (+5.4%) and the core number was a beat but not such a great one.

Equities really very range bound at the moment with paltry volumes, running around 70% today. You’ve got to think if this bond move continues, equities will have to wake up and follow suit. Whether the bond move continues remains to be seen…as does the read through for the equity market. I saw this somewhere today and thought it was great. Don’t be surprised to see this headline in a newspaper near you…"Asteroid hits earth, S&P up 25”

ps. Home sales data hadn't come out when writing this. It was nicht so good. It did at least inspire the title. I was struggling for one today.