For the week, the Dow gained 3.1% and the S&P500 3.5%, pushing both averages back into the black for the year. The Transports surged 4.0%, increasing y-t-d gains to 9.1%, and the Morgan Stanley Cyclical index 3.2%, increasing 2007 gains to 8.0%. The Utilities rose 4.0% (up 8.2% y-t-d) and the Morgan Stanley Consumer index 3.3% (up 1.8% y-t-d). The broader market also rallied sharply. The small cap Russell 2000 and S&P400 Mid-Cap indices both gained 3.9%. The NASDAQ100 advanced 3.0%, and the Morgan Stanley High Tech index added 1.4%. The Semiconductors gained 1.5%. The Street.com Internet Index jumped 3.2%, and the NASDAQ Telecommunications index rose 1.3%. The Biotechs rallied 5.8%. The Broker/Dealers surged 6.4%, and the Banks jumped 3.6%. With Bullion up $4.00, the HUI Gold index rallied 4.2%.
Two-year government yields added one basis point to 4.60%. Five-year yields increased 4 bps to 4.51%, and 10-year Treasury yields jumped 7 bps to 4.61%. Long-bond yields surged 11 bps to 4.80%. The curve flattened this week, with the 2yr/10yr spread now positively sloped one basis point. The implied yield on 3-month December ?07 Eurodollars rose 2.5bps to 4.885%. Benchmark Fannie Mae MBS yields rose 3 bps to 5.71%, this week reversing recent underperformance to Treasuries. The spread on Fannie?s 5 1/4% 2016 note dropped 4 to 35, and the spread on Freddie?s 5 1/2% 2016 note dropped about 4 to 35. The 10-year dollar swap spread declined 0.8 bps to 53.0. Corporate bond spreads generally were little changed, although junk spreads widened a couple basis points.
Investment grade issuers included Merrill Lynch $4.1 billion, Hospira $1.425bn, Bank of New York $750 million, CBS $700 million, Willis North America $600 million, American Honda $600 million, IBM $500 million, PNC $500 million, Southern Co. $400 million, Sovereign Bancorp $300 million, Conn Light & Power $300 million, Bunge $250 million, and UDR $150 million.
Junk issuers included Citizens Utility $750 million, Pinnacle Foods $575 million, Highwoods $400 million, Aventine Renewable Resources $300 million, Cleveland Electric $250 million, Sun Healthcare $200 million, and MSX International $205 million.
Convert issues included Vornado Realty Trust $1.4 billion, Prologis $1.1bn, Nortel Networks $1.0 billion, SL Green Realty $750 million, Host Hotels $600 million, SBS Communications $350 million, Extra Space Storage $250 million, Viropharma $225 million, Amerigroup $240 million, Komag $220 million, Diversa $100 million, and Pioneer $100 million.
International issuers included Panama $1.81bn, Shell $1.25bn, BBVA $600 million, Cerveceria Nacional $360 million, and GOL $225 million.
Japanese 10-year "JGB" yields rose 3 bps this week to 1.605%. The Nikkei 225 jumped 3.7% (up 1.5% y-t-d). German 10-year bund yields surged 10 bps to 4.00%. Emerging debt and equities markets were strong. Brazil?s benchmark dollar bond yields dropped 13 bps this week to a record low 5.69%. Brazil?s Bovespa equities index surged 6.6% (up 2.4% y-t-d). The Mexican Bolsa rose 5.2% (up 6.9% y-t-d). Mexico?s 10-year $ yields dipped one basis point to 5.47%. Russia?s 10-year Eurodollar yields declined one basis point to 6.67%. India?s Sensex equities index rallied 6.9% for the week (down 3.6% y-t-d). China?s Shanghai Composite index jumped 4.9% to a record high, increasing 2007 gains to 14.9%.
Freddie Mac posted 30-year fixed mortgage rates added 2 bps last week to 6.16% (down 16 bps y-o-y). Fifteen-year fixed rates increased 2 bps to 5.90% (down 9 bps y-o-y). And one-year adjustable rates declined 2 bps to 5.40% (up 8 bps y-o-y), the lowest level in almost a year. The Mortgage Bankers Association Purchase Applications Index dipped 0.9% this week. Purchase Applications were up 4.2% from one year ago, with dollar volume up 8.9%. Refi applications declined 4.5%. The average new Purchase mortgage declined to $241,000 (up 4.5% y-o-y), and the average ARM slipped to $405,200 (up 18.5% y-o-y).
Bank Credit data were impacted by the conversion of bank to a thrift institution, so I will exclude data this week.
M2 (narrow) "money" increased $24.4bn to a record $7.155 TN (week of 3/12). Narrow "money" has expanded $112bn y-t-d, or 7.5% annualized, and $409bn, or 6.1%, over the past year. For the week, Currency dipped $0.5 billion, and Demand & Checkable Deposits fell $8.9bn. Savings Deposits jumped $17.1bn, while Small Denominated Deposits added $1.3bn. Retail Money Fund assets increased $15.5bn.
Total Money Market Fund Assets (from Invest. Co Inst) jumped $23.3 billion last week to a record $2.431 TN. Money Fund Assets have increased $166 billion over the past 20 weeks (19.0% annualized) and $376 billion over 52 weeks, or 18.3%.
Total Commercial Paper added $1.9 billion last week to $1.997 TN, with a y-t-d gain of $22.8 billion (5% annualized). CP has increased $97 billion (13.3% annualized) over 20 weeks and $287 billion, or 16.8%, over the past 52 weeks.
Asset-backed Securities (ABS) issuance increased to $(12) billion. Year-to-date total ABS issuance of $153 billion (tallied by JPMorgan) is running behind the $169 billion from comparable 2006.
At $77 billion, Home Equity ABS issuance 35% behind last years pace. Yet year-to-date US CDO issuance of $83 billion is running 38% ahead of comparable 2006. Fed Foreign Holdings of Treasury, Agency Debt jumped $16.1bn last week (ended 3/21) to a record $1.876 TN, with a y-t-d gain of $124bn (30.6% annualized). "Custody" holdings have expanded at a 28% rate over 20 weeks and 18.2% y-o-y ($289bn). Federal Reserve Credit last week dipped $468 million to $851bn (down $1.1bn y-t-d). Fed Credit was up $30.3bn y-o-y, or 3.7%.
International reserve assets (excluding gold) - as accumulated by Bloomberg?s Alex Tanzi ? were up $833 billion y-o-y (19.7%) to a record $5.053 TN.
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