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Initial Claims dropped a spectacular 32k WoW (37k after the revision to the prior week) but this improvement is too good to be true. The Department of Labor reported that an unusual calendar caused the seasonal adjustment to break down. If you look at the NSA chart below, you can see that there's no unusual volatility in this series. There are always big swings in the NSA series around quarter-end, and it appears that the seasonal correction generated a misleading number today.
Unfortunately, it's not time to get excited yet.
2-10 Spread Remains Under Pressure
The current rate environment remains very difficult for bank margins. The 2-10 spread widened 7 bps in the last week to 174 bps.
Mortgage Purchase Applications Continue to Bounce Along the Bottom
Mortgage purchase applications rose 2.6% last week, a small gain off of a low level. For the YTD, purchase apps are running 8.6% lower than the prior year. This is not an encouraging sign for homebuyer demand. Refinance applications rose as mortgage rates fell, gaining 11.2% vs the prior week.
The table below shows the performance of financial subsectors over various durations.
Joshua Steiner, CFA
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