Annaly Capital Management, Inc. (NYSE: NLY) released its second quarter 2012 market commentary providing a review of the economy and the residential mortgage, commercial mortgage, asset-backed, corporate credit and treasury markets. Through its quarterly commentary Annaly expresses its thoughts and opinions on issues and events it monitors in the financial markets. Please visit our website,
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The world keeps getting flatter. In addition to items of specific domestic importance, the things that may drive sentiment in US fixed income and equity markets on any given day could include Spanish government bond yields, Chinese manufacturing or German unemployment. And while European headlines and “Fedspeak” are driving the current conversation, the horizon remains clouded with the uncertainty of the US election, regulatory flux and visions of a fiscal cliff.
The noise level has risen, and during the second quarter of 2012 the financial markets reacted with a flight from risk. The S&P 500 fell 2.75% during the second quarter, but is still up 9.49% year-to-date. The ten-year Treasury ended the quarter at 1.65% versus 2.20% on March 31, 2012, and 1.88% on December 31, 2011. The US Dollar trade-weighted index rose 2.4% in the second quarter and remains higher by 1.5% for the year. Commodities, as measured by the CRB Index, remained in a bear market that began in early 2011. They fell 7.9% in the second quarter and are down 7% YTD. The CRB index remains at levels similar to late 2004.
In general, scanning the incoming economic data in the second quarter, the world seems to be in the midst of a global slowdown. Eurozone manufacturing activity as measured by its Purchasing Managers Index stands at 45.1 in June and has been indicating contraction since August of 2011. Unemployment across the EU has risen to a record 11.1%. China’s PMI came in at 48.2 in June, and excess inventories of metals in China have been widely reported, another non-government indicator suggesting a slowdown.