by Calculated Risk on 10/13/2011 04:17:00 PM

Here is a look at European bond spreads and a measure of bank stress (Euribor-to-Eonia) from the Atlanta Fed weekly Financial Highlights released today (graphs as of Oct 12th).

The spread for Greece is at a record high. The spread for Portugal has been moving sideways, and the spread for Ireland has been declining.

The second graph below is a measure of European bank stress. This has declined a little in recent weeks, but is still elevated.

From the Atlanta Fed:

European bond spreads have narrowed over the past week for most sovereigns, except for Greece, which has seen its spread reach a record high.

• Since the September FOMC meeting, the 10-year yield spread between Greek and German bonds has widened by 267 basis points (bps) and is 472 bps higher since September 30. The yield spreads for Portugal and Ireland have both tightened, by 83 bps and 52 bps, respectively. Spanish and Italian spreads are also down, by 52 bps and 31 bps, respectively.

The second graph is the Euribor-to-Eonia spread: "Eonia is the Euro Overnight Index Average swap rate on unsecured interbank lending in the euro area."

The euro-based Euribor-to-Eonia spread has narrowed over the past week after rising steadily since late July. Since October 5, the spread has narrowed by 8 basis points (bps) to 14 bps, depending on the tenor, and is still elevated compared to July levels.

• The Euribor rates are offered interbank lending rates, denominated in euros and for a set of given maturities. The Euribor rate is determined by surveying 44 banks with the highest volume of business in the euro area, including four non-European banks.

by Calculated Risk on 10/13/2011 02:31:00 PM

Note: This is one of the industry specific measures that I follow.

From HotelNewsNow.com: STR: US hotels report slight performance gains

In year-over-year comparisons for the week, occupancy rose 1.5% to 64.4%, average daily rate increased 2.8% to US$104.48, and revenue per available room finished the week up 4.3% to US$67.32.

The slowdown in performance is attributable, in part, to Yom Kippur, the Jewish holiday which fell on 8 October this year. In 2010 the holiday was on 18 September.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using a four week average for the occupancy rate.

Click on graph for larger image in graph gallery.

We are now in the fall business travel season. The 4-week average of the occupancy rate will increase again seasonally. In September, the 4-week average was back to the pre-recession median, but so far the fall business travel season has been weaker than the median - but better than last year.

Even though the occupancy rate has mostly recovered, ADR and RevPAR are still lower than before the recession for the comparable week.

The second graph shows the 4-week average of the occupancy rate as a percent of the median since 2000. Note: Since this is a percent of the median, the number can be above 100%.

This shows the decline in the occupancy rate during and following the 2001 recession. The sharp decline in 2001 was related to 9/11, and the sharp increase towards the end of 2005 was due to Hurricane Katrina.

The occupancy rate really fell off a cliff in 2008, and has slowly recovered back close to the median. This measure has declined over the last couple of weeks.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 10/13/2011 11:28:00 AM

Mortgage rates increased, but are still near 60 year lows.

• From Freddie Mac: Fixed Mortgage Rates Up Sharply Following Jobs Report

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates up sharply from the previous week's record-setting lows following a better than expected employment report. Despite the sharp increase, mortgage rates remain near their 60-year lows.

30-year fixed-rate mortgage (FRM) averaged 4.12 percent with an average 0.8 point for the week ending October 13, 2011, up from last week when it averaged 3.94 percent.

15-year FRM this week averaged 3.37 percent with an average 0.8 point, up from last week when it averaged 3.26 percent. A year ago at this time, the 15-year FRM averaged 3.62 percent.

• From RealtyTrac: Foreclosure Activity on Slow Burn

RealtyTrac® (www.realtytrac.com) ... today released its U.S. Foreclosure Market Report™ for the third quarter of 2011, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 610,337 properties in the third quarter, an increase of less than 1 percent from the previous quarter and a decrease of 34 percent from the third quarter of 2010. ...

Foreclosure filings were reported on 214,855 U.S. properties in September, a 6 percent decrease from August and a 38 percent decrease from September 2010. September marked the 12th straight month where foreclosure activity decreased on a year-over-year basis.

“U.S. foreclosure activity has been mired down since October of last year, when the robo-signing controversy sparked a flurry of investigations into lender foreclosure procedures and paperwork,” said James Saccacio, chief executive officer of RealtyTrac. “While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up.”

by Calculated Risk on 10/13/2011 09:15:00 AM

The Department of Commerce reports:

[T]otal August exports of $177.6 billion and imports of $223.2 billion resulted in a goods and services deficit of $45.6 billion, virtually unchanged from July, revised. August exports were $0.1 billion less than July exports of $177.7 billion. August imports were $0.1 billion less than
July imports of $223.3 billion.

The trade deficit was slightly below the consensus forecast of $46 billion.

The first graph shows the monthly U.S. exports and imports in dollars through August 2011.

Click on graph for larger image.

Exports and imports were mostly unchanged in August (seasonally adjusted). Exports are well above the pre-recession peak and up 15% compared to August 2010; imports have stalled recently and are up about 11% compared to August 2010.

The second graph shows the U.S. trade deficit, with and without petroleum, through August.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil averaged $102.62 per barrel in August, down slightly from $104.27 per barrel in July. The trade deficit with China increased to a record $29 billion; trade with China remains a significant issue.

Imports have been moving sideways for the last several months - partially due to slightly lower oil prices. However the trade deficit with China continues to increase. Exports are still generally trending up.

by Calculated Risk on 10/13/2011 08:38:00 AM

The DOL reports:

In the week ending October 8, the advance figure for seasonally adjusted initial claims was 404,000, a decrease of 1,000 from the previous week's revised figure of 405,000 [revised up from 401,000]. The 4-week moving average was 408,000, a decrease of 7,000 from the previous week's revised average of 415,000.

The following graph shows the 4-week moving average of weekly claims since January 2000 (there is a longer term graph in graph gallery).

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined this week to 408,000.

This is the lowest level for the 4-week average of weekly claims since August, and this was at the consensus forecast. This is still elevated, but the decline in the 4-week average is a positive.

by Calculated Risk on 10/12/2011 11:31:00 PM

From the Irish Times: Up to 10,000 homeowners could enter 'mortgage to rent' scheme

The Inter-Departmental Working Group on Mortgage Arrears, which published its widely anticipated report yesterday, has proposed the introduction of two “mortgage to rent” social housing schemes. These would mean approved housing agencies taking ownership of homes in specific circumstances or the leasing of houses by banks to local authorities, which would in turn rent them to former owners.
...
The report ... stressed that there would be no blanket debt or negative equity forgiveness. Defending the decision not to implement a blanket forgiveness scheme, the report states it would cost some €14 billion to clear negative equity in Irish mortgage portfolios, while tackling those home loans taken out between 2006 and 2008 would cost in the region of €10 billion.

Dean Baker and others have proposed a similar plan for the U.S. (Here is Dean Baker's 2009 proposal). There was some discussion a few months ago about converting some homeowners to renters, but I haven't heard anything about it lately.

The U.S. population is roughly 50 times the size of Ireland, so a similar plan would be for 500 thousand homeowners. A blanket forgiveness more would probably cost $1 trillion or more in the U.S. (won't happen in the U.S. either).

by Calculated Risk on 10/12/2011 08:05:00 PM

A few European stories ... the next key date is Sunday, October 23rd, when European Union leaders will hold a summit meeting.

This is probably the last mention of Slovakia for some time, from the WSJ: Europe's Bailout Fund Overcomes a Hurdle

Slovakia's largest opposition party ... cleared the way Wednesday for the country to endorse changes to the €440 billion ($600 billion) euro-zone bailout fund

From the NY Times: E.U. Tells Banks to Garner Bigger Reserves

Under proposals outlined by the European Commission president, José Manuel Barroso, banks would be required to temporarily bolster their protection against losses ... Mr. Barroso also called on the 17 European Union members that use the euro to maximize the capacity of their 440 billion euro ($600 billion) bailout fund — a clear hint that he favors leveraging the rescue fund to increase its firepower to as much as 2 trillion euros ($2.8 trillion)

From the Financial Times: Insurance plan to boost rescue fund’s reach

European policymakers are moving towards a plan that would enable the eurozone’s €440bn rescue fund to insure investors against some losses on government bonds, arguing it presents the fewest legal and political hurdles to quickly increasing the fund’s firepower.
excerpt with permission

On Thursday, Greek prime minister George Papandreou is is meeting with Herman van Rompuy, president of the European council, and Jean-Claude Juncker, chair of euro finance ministers in Brussels.

The Greek 2 year yield isat 73.5%. The Greek 1 year yield is at 156.4% (a new high).

The Portuguese 2 year yield is at 17.3% and the Irish 2 year yield is at 7.4%.

The Spanish 10 year yield is at 5.1% and the Italian 10 year yield is at 5.7% (the Italian bond yield is moving up).

by Calculated Risk on 10/12/2011 04:07:00 PM

There are only a few areas where the MLS breaks down monthly sales by foreclosure, short sales and conventional (non-distressed) sale. I've been tracking the Sacramento market to watch for changes in the mix over time. (here was my post yesterday: Distressed House Sales using Sacramento Data)

Economist Tom Lawler sent me the following table today for a few other areas. The usual suspects have the highest percentage of distressed sales: Las Vegas and Phoenix. Sacramento is similar to Phoenix.

The Mid-Atlantic area - covered by the MRIS (Metropolitan Regional Information Systems, Inc.) has a relatively low level of distressed sales.

Why short sales in Minneapolis are so low relative to foreclosures is a mystery ...

I'll be watching for when the percentage of distressed sales starts to decline (I might have to be patient!).

September MLS Sales Share, Selected Areas
	Foreclosure Share	Short Sales Share	"Non-Distressed" Share
Las Vegas	49.4%	23.5%	27.1%
Reno (SF)	38.0%	31.0%	31.0%
Phoenix	37.1%	27.0%	35.9%
Sacramento	37.9%	26.1%	36.0%
Minneapolis	28.4%	11.3%	60.3%
"Mid-Atlantic"*	14.4%	12.6%	73.0%
*area covered by MRIS, including DC and Baltimore metro areas

by Calculated Risk on 10/12/2011 02:00:00 PM

From the Fed: Minutes of the Federal Open Market Committee, September 20-21, 2011. Excerpts:

Participants saw considerable uncertainty surrounding the outlook for a gradual pickup in economic growth.
...
Several commented that, with households and businesses seeking to reduce leverage rather than to borrow and with housing markets in distress, some of the normal mechanisms through which monetary policy actions are transmitted to the real economy appeared to be attenuated. Many participants saw significant downside risks to economic growth. While they did not anticipate a downturn in economic activity, several remarked that, with growth slow, the recovery was more vulnerable to adverse shocks. Risks included the possibility of more pronounced or more protracted deleveraging by households, the chance of a larger-than-expected near-term fiscal tightening, and potential spillovers to the United States if the financial situation in Europe were to worsen appreciably. Participants agreed to consider further how best to use their monetary policy and liquidity tools to deal with such shocks if they were to occur.

On policy:

In the discussion of monetary policy for the period ahead, most members agreed that the revisions to the economic outlook warranted some additional monetary policy accommodation to support a stronger recovery and to help ensure that inflation, over time, was at a level consistent with the Committee's dual mandate.
...
Those viewing greater policy accommodation as appropriate at this meeting generally supported a maturity extension program that would combine asset purchases and sales to extend the average maturity of securities held in the SOMA without generating a substantial expansion of the Federal Reserve's balance sheet or reserve balances.
...
Two members said that current conditions and the outlook could justify stronger policy action, but they supported undertaking the maturity extension program at this meeting as it did not rule out additional steps at future meetings. Three members concluded that additional accommodation was not appropriate at this time.

by Calculated Risk on 10/12/2011 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings in August was 3.1 million, little changed from July. Although the number of job openings remained below the 4.4 million openings when the recession began in December 2007, the level in August was 944,000 higher than in July 2009 (the most recent trough). The number of job openings is up 26 percent since the end of the recession in June 2009.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This is a new series and only started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for August, the most recent employment report was for September.

Click on graph for larger image in graph gallery.

Notice that hires (dark blue) and total separations (red and blue columns stacked) are pretty close each month. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

In general job openings (yellow) has been trending up, and are up about 7% year-over-year compared to August 2010. Layoffs and discharges are down about 10% year-over-year.

Quits increased in August, and have been trending up - and quits are now up about 10% year-over-year. These are voluntary separations and more quits might indicate some improvement in the labor market. (see light blue columns at bottom of graph for trend for "quits").