July income 0%, spending +0.2%

The July personal income and spending figures just hit the tape and they were roughly in line with expectations. Specifically, personal income was unchanged against a forecast of +0.1%. But the June decline was revised from -1.3% to -1.1%. Personal spending rose 0.2%, right in line with forecasts, and the June number was revised higher to +0.6% from +0.4%. The core PCE inflation gauge was up 0.1% on the month, in line with forecasts. The stock market had a slightly positive tone coming into this number, while the bond market was seeing some profit taking. These numbers haven't changed much in the wake of the numbers.

7-year note auction goes pretty well

Somewhat surprisingly, the auction of $28 billion 7-year Treasury Notes went pretty well. The notes were sold at a yield of 3.092%, compared with pre-auction talk of 3.124%. Some 61.2% of the notes went to indirect bidders, while the bid-to-cover ratio came in at 2.74. That compares with 62.5% and 2.63 at the last sale of 7s in July.

$39 billion sale of 5-year notes decent

The Treasury just unloaded $39 billion in 5-year Treasury Notes, tying a record for the largest such auction ever. How'd things go? The notes were sold at a yield of 2.494%. That was ever-so-slightly better than the 2.509% yield the market was expecting, according to Bloomberg.

Indirect bidders bought 56.4% of the notes sold, while the bid-to-cover ratio came in at 2.51. The IB reading was up from 36.7% at the last auction, but below the June auction peak of 62.8%. Ditto for the B2C ratio: It was up from 1.92 a month earlier, but below the June high of 2.58.

All in all, another decent auction -- not fantastic, but not terrible, either.

New home sales surge 9.6% in July

July new home sales figures were released this morning. Let's get straight to the numbers:

* New home sales surged yet again, by 9.6% to a seasonally adjusted annual rate of 433,000 from an upwardly revised 395,000 in June. That was better than the average forecast of economists polled by Bloomberg, who were expecting 390,000 sales. Regionally, sales gained in three out of four areas of the country. They rose 1% in the West, jumped 16.2% in the South, and surged 32.4% in Northeast. Sales fell 7.6% in the Midwest.

* The raw number of homes for sale continued to decline, falling to 271,000 from 280,000 in June. That's the lowest reading going back to March 1993. The months supply at current sales pace indicator of inventory dropped to 7.5 from 8.5.

* The median price of a new home dipped slightly to $210,100 from $210,400 in June. On a year-over-year basis, prices fell 11.5% from $237,300.

July was another month of improvement in housing. Not only did sales come in much hotter than expected, but the raw supply of new homes for sale dropped to its lowest level in more than 16 years.

Overall supply levels remain high, once you factor existing homes into the mix. We'll be dealing with a continued influx of foreclosed property over the next 12-18 months, too. But this is clear evidence the dramatic cut back in housing starts, plus increasing consumer confidence and the targeted tax cut for first-time buyers, is restoring stability to the new home market.

Record-setting $42 billion, 2-year note sale goes okay

We're unloading tons of Treasury debt this week. First up: A record-tying $42 billion in 2-year Notes. The notes just sold at a yield of 1.119%, slightly above the 1.115% that participants expected. Indirect bidders snapped up 49.4% of the notes sold, while the bid-to-cover ratio came in at 2.68. The bidder percentage figure rose from 33% at the last auction, while the B2C ratio was the lowest since February. The verdict: Not great, but not terrible, either. Bonds have essentially gone nowhere in the wake of the news.

Deficit forecast hiked to $9 trillion; Debt load to triple

The Obama administration threw in the towel on its optimistic deficit projections today. The White House is now forecasting cumulative deficits of $9 trillion over the next 10 years, compared with a previous estimate of $7.1 trillion. At the same time, the projection for this year's deficit dropped to $1.6 trillion; the improvement stems from the fact the banking sector didn't need as much bailout money as previously anticipated.

Something else that's scary to consider: Total U.S. government debt is now forecast to TRIPLE to $23 trillion by 2019. That's an increase of $2 trillion from the administration's May estimate. As a percentage of GDP, that'd be 76.5% (compared with 56% now). The debt load hasn't been this high in relative terms since World War II. More details can be found here.

Deficit forecast hiked to $9 trillion; Debt load to triple

The Obama administration threw in the towel on its optimistic deficit projections today. The White House is now forecasting cumulative deficits of $9 trillion over the next 10 years, compared with a previous estimate of $7.1 trillion. At the same time, the projection for this year's deficit dropped by $261 billion to $1.5 trillion; the improvement stems from the fact the banking sector didn't need as much bailout money as previously anticipated.

Something else that's scary to consider: Total U.S. government debt is now forecast to TRIPLE to $17.5 trillion by 2019. That's an increase of $2 trillion from the administration's May estimate. As a percentage of GDP, that'd be 76.5% (compared with 56% now). The debt load hasn't been this high in relative terms since World War II. More details can be found here.

June S&P/Case-Shller figures: -15.4% YOY

The latest figures from S&P/Case-Shiller show home prices continuing to fall, but at a steadily declining rate. The year-over-year change in home prices in 20 top metropolitan areas was -15.4% in June, down from -17% a month earlier and better than the forecast of -16.4%. Prices are still falling in all 20 metropolitan areas, with declines ranging from 2.2% in Dallas to as much as 32.4% in Las Vegas. On a monthly basis, however, prices rose 1.39%. That was the second increase in a row (May's gain was 0.5%).

Ben Bernanke gets the nod

Ben Bernanke will reportedly be reappointed to another term as Federal Reserve Board Chairman. There was some speculation out there that the Obama administration might switch horses (nominating someone like Larry Summers). But no longer. More from the New York Times:

"President Obama on Tuesday will nominate Ben S. Bernanke to a second term as chairman of the Federal Reserve, administration officials said.

"The announcement is a major victory for Mr. Bernanke, a Republican who was appointed by President George W. Bush almost four years ago and who had briefly served as chairman of Mr. Bush’s Council of Economic Advisers.

"A top White House official said Mr. Obama had decided to keep Mr. Bernanke at the helm of the Fed because he had been bold and brilliant in his attempts to combat the financial crisis and the deep recession.

“The president thinks that Ben’s done a great job as Fed chairman, that he has helped the economy through one of the worst experiences since the Great Depression and that he has essentially been pulling the economy back from the brink of what would have been the second Great Depression,” the White House chief of staff, Rahm Emanuel, said Monday night."

Existing home sales jump again in July

The latest batch of housing figures just hit the tape and boy were they a doozy ...

* Existing home sales shot up 7.2% to a seasonally adjusted annual rate of 5.24 million units from 4.89 million in June. That was way hotter than the 5 million units that economists were expecting. It's also the highest since August 2007.

* Single-family sales rose 6.5%, while condo and cooperative sales surged 12.5%. By region, sales rose across most of the country. They gained 7.1% in the South, 10.9% in the Midwest, and 13.4% in the Northeast. Sales dipped 1.7% in the West, by contrast.

* The raw number of homes for sale rose 7.3% to 4.091 million units from 3.811 million in May. But supply was down 10.6% from a year earlier. The months supply at current sales pace indicator of inventory held steady at 9.4. Single family inventory dipped to 8.6 from 8.9, but condo inventory climbed to 15.1 from 13.1.

* The median price of an existing home dropped 2% to $178,400 from $182,000 in June. That was down 15.1% from $210,100 in the year-ago period.

Thanks to relatively low mortgage rates, falling prices, and improved consumer confidence, the housing market is continuing to show signs of improvement. Existing home sales jumped more than 7% in July, the biggest monthly gain since the Realtors' group began tracking combined condo, coop and single-family home sales in 1999.

Secondary indicators showed a bit of weakness, with the raw supply of homes on the market rising and prices dipping month-over-month. That will need to be monitored going forward, especially in the condo sector, which remains dramatically oversupplied. But the latest report adds to mounting evidence that the worst of the housing market crash is behind us.

MBA: Q2 delinquency and foreclosure rates rise again

The Mortgage Bankers Association released data on second quarter mortgage delinquencies and foreclosures this morning. Here's what we learned:

* The overall mortgage delinquency rate inched up to 9.24% in Q2 2009 from 9.12% in Q1 2009 and 6.41% a year earlier. At the risk of sounding like a broken record, this is yet another record high for the delinquency rate (the MBA data goes back to 1972).

* The subprime DQ rate climbed to 25.35% from 24.95% a quarter earlier and 18.67% a year earlier. The prime-only DQ rate rose to 6.41% from 6.06% in Q1 2009 and 3.93% a year earlier. This shows that late payments have migrated up the mortgage food chain.

What's also worth noting: FHA delinquencies are starting to rise. The DQ rate there hit 14.42% in Q2 2009, up from 13.84% in Q1 2009 and 12.63% a year earlier. The FHA program has become the "go to" place for borrowers who previously might have taken out subprime or Alt-A loans. Only time will tell if the government is making a wise choice by keeping FHA standards so lenient in the midst of the worst housing downturn on record.

* The percentage of mortgages entering the foreclosure process inched down to 1.36% from 1.37% a quarter earlier (That was a record high). The overall percentage of mortgages in any stage of foreclosure spiked to 4.3% from 3.85% a quarter earlier. This is a fresh record.

* Regionally, delinquency rates were the highest in Mississippi (13.04%), Nevada (12.14%), Michigan (11.57%), and Indiana (11.14%). The Dakotas had the lowest DQ rates (3.76% in North Dakota, 4.13% in South Dakota).

Mortgage performance continues to disappoint. Delinquencies and foreclosures set yet another record high in the second quarter, with just over 13% of U.S. loans in some stage of distress. That's a testament to the depth and breadth of the housing collapse.

Still, there are a few glimmers of hope. Thirty-day delinquency rates actually ticked down a bit in a few categories, and the percentage of properties entering the foreclosure process has stabilized. These could be early reflections of stabilization in the economy and certain housing markets. The push toward increased modifications as an alternative to foreclosure is another likely contributor.

If we continue to see gradual improvement in the U.S. housing market, we'll see gradual improvement in late payment and foreclosure rates, albeit with a lag. Policymakers probably have their fingers crossed.

July housing starts, permits dip

We just got the latest data on home construction. Here's a recap of what they showed:

* Overall housing starts dipped to 581,000 in July from 587,000 in June. That 1% decline left starts running a bit below the average forecast of economists (599,000). Building permit activity slumped to a seasonally adjusted annual rate of 560,000 from 570,000 against expectations for a reading of 577,000.

* By property type, single family construction activity increased for the fifth month in a row, rising 1.7%. Multifamily construction, on the other hand, fell for a second month. It dropped 13.3%. Single family permits showed a healthy gain of 5.8%, while multifamily permits reversed all of last month's rise and then some, falling by 25.5%.

* Regionally, starts fell in three out of four geographic areas. They declined 1.4% in the South, 1.6% in the West, and 16.3% in the Northeast. Starts rose 12.9% in the Midwest. On the permitting front, activity was mixed. Permits rose 7% in the West and 14.1% in the Midwest. They fell 5.2% in the Northeast and 9.2% in the South.

The housing news was a mixed bag this time around. While overall construction and permitting activity was a bit disappointing, the weakness was confined to the multifamily side of the business. Single family home construction actually rose for a fifth straight month, while single-family permits showed a healthy gain of almost 6%.

Construction activity remains low, historically speaking. But evidence continues to mount that the worst of the declines for this cycle are behind us. Still, that doesn't mean we're going to see a huge resurgence in construction. After all, buyers still have plenty of homes to choose from, and distressed and foreclosed properties will continue to flood the market well into 2010.

NAHB index inches higher in August

We just got the latest figures on housing from the National Association of Home Builders. Here's what they showed ...

* The group's index of builder sentiment climbed to 18 in August from 17 in July. That matched the average forecast of economists polled by Bloomberg. It's also the highest reading we've seen since June 2008.

* Among the subindices in the report, the one which tracks present sales was unchanged at 16. The subindex that tracks expectations about future sales popped to 30 from 26, while the subindex that tracks prospective buyer traffic rose to 16 from 13.

* Regionally speaking, there were gains in three out of four geographic areas. The Midwest index climbed to 16 from 14, the West index rose to 17 from 14 , and the Northeast index popped to 24 from 16. The index that tracks activity in the South, on the other hand, dipped to 18 from 19.

July jobs report comes in hot

The July jobs report just hit the tape and I have to say, it came in "hot." The details are as follows:

* Nonfarm payrolls fell by 247,000 last month, much smaller than the average forecast for a reading of -325,000. June's number was revised down to -443,000 from -467,000 and May's reading was revised down to 303,000 from 322,000.

* By industry, manufacturing lost 52,000 jobs (compared to -131,000 a month earlier), construction lost 76,000 (vs. -86,000), retail trade lost 44,000 (vs. -21,000), and trade/transport lost 87,000 (vs. -45,000). The biggest job gains were in education/health (+17,000), leisure and hospitality (+9,000) and government (+7,000).

* The unemployment rate surprised as well. It dropped to 9.4% from 9.5% in the prior month. Economists were expecting it to increase to 9.6% instead.

* Average hourly earnings climbed 0.2%, an improvement from the unchanged reading in June. That was also better than the forecast for 0.1%. Average weekly hours ticked up to 33.1 from 33. Lastly, the diffusion index improved to 30.1 from 28.6. That means fewer industries overall are shedding jobs.

Treasury keeps increasing the size of its debt auctions

The Treasury Department just released the details of its next round of debt auctions. It looks like we'll get $37 billion in 3-year notes on Tuesday, $23 billion in 10-year notes on Wednesday and $15 billion in 30-year bonds on Thursday. Treasury also admitted that auction sizes will rise "gradually" in the medium term, and that it may get rid of 20-year TIPS auctions in favor of 30-year TIPS sales. The debt ceiling of $12.1 trillion will likely get tagged in the final quarter of 2009, but as we all know, that "ceiling" is a joke. Congress always increases it whenever necessary. Bond futures recently tagged the morning lows, and were down about 26/32 at last check.

ADP, Challenger: Job picture improves slightly

We won't get the "official" jobs report for the month of July until this Friday. But this morning, we got two preliminary reports on employment and they both show some improvement, though nothing to blow the barn doors off.

First, the Challenger, Gray & Christmas report on job cut announcements showed cuts up to 97,373 in July from 74,393 in June. However, cuts were down 5.7% from the year-ago level. The biggest increases in layoffs were seen in transportation and telecommunications, while the biggest declines in cuts were seen in the government/non-profit and auto sectors.

Second, the ADP report showed the economy shedding 371,000 jobs in July. That was down significantly from a reading of 463,000 in June, and the smallest loss of jobs we've seen from ADP since October 2008. It did miss the consensus forecast of -350,000, however.

The immediate market reaction? After an initial pop on the news, bond futures have reversed and are now down 24/32 on the morning. Stock futures are ever-so-slightly worse, while the dollar has rallied a bit and gold has dipped a bit. But essentially, we're unchanged from where we were before the number.

Pending home sales climb 3.6% in June

The National Association of Realtors just released the latest data on pending home sales. The June figures continued the recent trend of improvement ...

* Pending home sales climbed 3.6% in June. That was much better than the 0.7% gain that economists were expecting. Last month's 0.1% gain was also revised higher, to 0.8%.

* On a year-over-year basis, the pending sales index was up 6.7% to 94.6 from 88.7. That's the highest index value going all the way back to June 2007.

* Pendings gained in all four regions of the country. They rose 0.4% in the Northeast, 0.8% in the Midwest, 2.9% in the West, and 7.1% in the South.

Slow and steady improvement is the story in the U.S. housing market. Pending home sales rose in June on both a month-over-month and year-over-year basis. Moreover, the improvement was broad-based. We saw sales gains in all four regions of the country, and the pending index overall hit its highest level in almost two years.

We won't return to the "glory days" of the mid-2000s in housing, but frankly, that's a good thing. I'd much rather see steady, consistent gains in sales; steady, consistent reductions in the rate of price depreciation; and steady, consistent declines in home inventory. That's exactly what is happening, and what should continue to happen as long as mortgage rates don't spike too sharply and/or unemployment doesn't worsen materially from here.

Bonds getting crushed ... dollar tanking ... stocks moving higher as economic data comes in hot

What a day! The bond market is getting crushed, the dollar is falling off a cliff, and stocks are rampaging to the upside globally thanks to strong global economic data. The CLSA China Purchasing Managers' Index got things going overnight when it rose to 52.8 in July from 51.8 in June. That's the highest reading in a year. Then a few minutes ago, the U.S. ISM Manufacturing Index jumped to 48.9 in July from 44.8 in June. That topped expectations for a reading of 46.5. Construction spending was also better than forecast -- UP 0.3% against a DOWN 0.5% forecast.

As I write, the long bond futures are off 1 4/32. The yield on the 10-year Treasury Note is up 13 basis points to 3.61%. The Dollar Index is down 52 basis points, taking out key technical support that dates back to early June. And the Dow is up about 59 points.