Economic Commentary

Thursday, March 11, 2010

Treasury security prices fell Wednesday as investors sought riskier assets.  The yield on the two-year note rose three basis points to 0.91%.  Ten-year notes pared early losses after the bid-to-cover ratio on yesterday's $21 billion auction of the debt came in at 3.45, the highest on record.  The yield on the benchmark 10-year note rose two basis points to 3.72% and has now risen 72 basis points in the past 12 months.

The Commerce Department reported yesterday that the value of wholesalers' inventories unexpectedly fell 0.2% in January, a sign companies had difficulty keeping up with demand.  Inventories were forecast to rise 0.2% according to the median estimate of 33 economists surveyed by Bloomberg News.  Sales rose for the tenth straight month, jumping 1.3% in January, after a 1.2% gain in December.  Wholesalers had enough goods on hand to last 1.1 months at the current sales pace, the lowest since record-keeping began in 1992. 

The U.S. government posted a record budget deficit of $221 billion in February, compared with a deficit of $194 billion in February 2009, the Treasury Department reported yesterday.  The figures show this year's deficit will likely surpass the record $1.4 trillion in the fiscal year that ended in September.  Revenue and other income rose 23% to $107.5 billion from the same month a year ago, the first increase since April 2008.  Spending, however, increased 17% to $328.4 billion as the government continued its attempt to boost the economy by spending huge sums of money.  Last week the Congressional Budget Office said that President Obama's 2011 budget proposal would create bigger annual deficits that projected and than publically held government debt will reach $20.3 trillion, or 90% of GDP, by 2020.

The Mortgage Bankers Association's index of mortgage applications increased 0.5% in the week ended March 5, led by an increase in purchases, despite a small rise in mortgage rates.  The group's refinancing gauge fell 1.5% while its purchasing measure rose 5.7%.

The information contained herein has been obtained from sources deemed to be reliable: however Southeast Corporate does not guarantee its accuracy or completeness. All opinions and estimates included in this report constitute Southeast's judgment as of the date of this report and are subject to change without notice.