by Calculated Risk on 3/12/2010 08:30:00 AM

On a monthly basis, retail sales increased 0.3% from January to February (seasonally adjusted, after revisions), and sales were up 4.5% from February 2009 (easy comparison).

UPDATE: January was revised down sharply. Jan was originally reported at $355.8 billion, an increase of 0.5% from December.

February was reported at $355.5 billion - a decline without the revision to January.

January has been revised down to $354.3 or an increase of 0.1% from December.

Click on graph for larger image in new window.

This graph shows retail sales since 1992. This is monthly retail sales, seasonally adjusted (total and ex-gasoline).

The red line shows retail sales ex-gasoline and shows the increase in final demand ex-gasoline has been sluggish.

Retail sales are up 6.0% from the bottom, but still off 6.4% from the peak. Retail ex-gasoline are up 3.6% from the bottom and still off 5.4% from the peak.

The second graph shows the year-over-year change in retail sales (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 2.1% on a YoY basis (4.5% for all retail sales). The year-over-year comparisons are easy now since retail sales collapsed in late 2008. Retail sales bottomed in December 2008.

Here is the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $355.5 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.9 percent (±0.5%) above February 2009.
...
Gasoline stations sales were up 24.0 percent (±1.5%) from February 2009 and nonstore retailers sales were up 11.8 percent (±1.7%) from last year.

by Calculated Risk on 3/12/2010 12:09:00 AM

From Bloomberg: Yellen Said to Be Obama’s Pick for Fed Vice Chairman

I suggested Dr. Yellen as a possible candidate for Fed Chairman last year, so obviously I think this is a good choice. She was way ahead of most other Fed members in recognizing the housing bubble, and she is apparently well respected by other Fed members. She is also very focused on unemployment (something we need right now).

Yellen served on the Federal Open Market Committee (FOMC) last year - and this would put her back on the Committee (the Fed Presidents rotate each year).

by Calculated Risk on 3/11/2010 08:21:00 PM

The NY Times Deal Book has posted the Lehman's examiners report online: Court-Appointed Lehman Examiner Unveils Report

There is an interesting excerpt on the apparent use of repo transactions to bolster Lehman's balance sheet:

... former Global Financial Controller Martin ... Kelly believed “that the only purpose or motive for the transactions was reduction in balance sheet”; felt that “there was no substance to the transactions”; ... In addition to its material omissions, Lehman affirmatively misrepresented in its financial statements that the firm treated all repo transactions as financing transactions – i.e., not sales – for financial reporting purposes.

From Reuters: Examiner sees accounting gimmicks in Lehman demise

And from the WSJ: Examiner: Lehman Torpedoed Lehman and How Lehman Allegedly Manipulated Its Balance Sheet

by Calculated Risk on 3/11/2010 07:04:00 PM

Daylight Savings Time
"Spring Forward" .... taken too far
What day is today?
by Soylent Green is People
From the FDIC: Valley National Bank, Wayne, New Jersey, Assumes All of the Deposits of LibertyPointe Bank, New York, New York

LibertyPointe Bank, New York, New York, was closed today by the New York State Banking Department, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver....

As of December 31, 2009, LibertyPointe Bank had approximately $209.7 million in total assets and $209.5 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $24.8 million. ... LibertyPointe Bank is the 27th FDIC-insured institution to fail in the nation this year, and the first in New York. The last FDIC-insured institution closed in the state was Waterford Village Bank, Williamsville, July 24, 2009.

Is it Friday?

by Calculated Risk on 3/11/2010 05:10:00 PM

Some key points:

The Fed MBS purchases are scheduled to end on March 31st.

It will take a couple of months for some of these purchases to settle on the Fed's balance sheet (see: the discussion from SIFMA: "To-Be-Announced" Trading of Agency Passthrough Securities)

The coming increase in the Fed's balance sheet (and the expansion of the Supplementary Financing Program (SFP) over the same period) are related to the MBS settling on the Fed's balance sheet. Now that the short term liquidity facilities are finished - the balance sheet will increase by about $200 billion over the next couple of months as the remaining MBS settle. This expansion would result in an increase in excess reserves, and the almost $200 billion ramp-up in the SFP will counterbalance this increase. The Treasury apparently waited to announce this until the statutory debt ceiling was increased.

I expect the spread between mortgage rates and the 10 year Treasury yield to rise slowly over a few months by 35 to 50 bps after the Fed stops buying. Others - like the Fed's Brian Sack - thinks any increase will be much smaller until the Fed starts selling MBS. Those worried about an immediate 100 to 200 bps jump in mortgage rates can probably already relax! We will know in a few weeks ...

A key short term question (for April) is: Will any increase in mortgage rates be enough to seriously impact refinance activity? According to Freddie Mac Primary Mortgage Market Survey® (PMMS®) of lenders, qualifying "30-year fixed-rate mortgage (FRM) averaged 4.95 percent" last week. It seems refinance activity is fairly strong with mortgage rates at or below 5%.

Here is the Federal Reserve balance sheet break down from the Atlanta Fed weekly Financial Highlights released today (as of last week):

Click on graph for larger image in new window.

Graph Source: Altanta Fed.

From the Atlanta Fed:

The balance sheet contracted $6.9 billion for the week ended March 3.

Holdings of agency debt and mortgage backed securities shrank $4.7 billion, and other assets declined by $2.2 billion.

The balance sheet is expected to peak during the first half of this year after the MBS purchase program is completed and purchases settle on the balance sheet.

The second graph shows the MBS purchases by week. From the Atlanta Fed:

The Fed purchased a net total of $10 billion of agency-backed MBS through the week of March 3. This purchase brings its total purchases up to $1.22 trillion, and by the end of the first quarter 2010 the Fed will have purchased $1.25 trillion (thus, it is 98% complete).

The NY Fed purchased an additional net $10 billion in MBS for the week ending ending March 10th. This puts the total purchases at $1.230 trillion or almost 98.4% complete. Just $20 billion more and three weeks to go ...

The Fed's balance sheet released today shows "only" $1.029 trillion in MBS on March 10th. As mentioned above, the difference is the NY Fed announces the purchases when they contract to buy; the Federal Reserve places the MBS on the balance sheet when the contract settles.

The countdown ends in 3 weeks, and I don't expect any fireworks ...