CHM Blog

Daily Market Analysis

Rates and stocks are ticking lower and on Fed Chair Jerome Powell's prepared statements at Jackson Hole Symposium.

Fed Chair Jerome Powell released his prepared speech at 10:00 am ET.

Here are a few key highlights:

  • He said, "based on our assessment of the implications of these developments, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective."
  • He cited/highlighted three adverse developments since the last FOMC meeting: New Tariffs on China and from China, further evidence of a global slowdown, notably in Germany in China and a sharp downward move of long-term bond rates around the world "to near post-crisis lows."
  • Fitting Trade Policy Into Risk-Management Framework Is a New Challenge
  • US Economy Has Continued to Perform Well Overall
  • Monetary Policy Cannot Provide Settled Rulebook for Trade

The minutes from the ECB meeting are out; the ECB is going to announce a major stimulus QE, buying bonds, and lower interest rates. It didn't do it at the meeting, but the reports are leaving no doubt the ECB is going to move. The debate in the meeting centered on whether a piecemeal approach or an all-in move with both QEs and cutting rates at the same time; the conclusion was for an all-in move likely next month. The Bank has made it clear leaving markets to prepare.

Most all focus now is on what Powell said, but this weekend also has a G-7 meeting of leaders in France. China's announcement of additional tariffs will add more unsettled issues to talk about. France's Emmanuel Macron and leaders including the UK's new prime minister, Boris Johnson, along with US President Donald Trump, disagreements over everything from Brexit to the future of the global trading system likely will stand in the way of unified solutions.

China announced new tariffs on $75B US imports to retaliate against US moves to slap punitive tariffs on an additional $300B of Chinese goods. Tariffs of 5% and 10% on what amounts to roughly the remaining US imports it has yet to imposes punitive taxes on including autos and auto parts. The tariffs coming in two moves; Sept. 1 and Dec. 15, the same dates US tariffs go into effect. Agricultural products, apparel, chemicals, and textiles.

At 10:00 am ET July new home sales, expected at 645K generally unchanged from June. As released sales at 635K but June revised to 728K from 646K.

PRICES @ 10:00 AM

10 yr. note: 1.60% -1 bp

5 yr. note: 1.48% -1 bp

2 Yr. note: 1.60% -1 bp

30 yr. bond: 2.10% unch

Libor Rates: 1 mo. 2.145%; 3 mo. 2.132%; 6 mo. 2.042%; 1 yr. 1.973% (8/22/19)

30 yr. FNMA 3.5: @9:30 102.53 +2 bp (+1 bp from 9:30 yesterday)

15 yr. FNMA 3.0: @9:30 102.38 +1 bp (+3 bp from 9:30 yesterday)

30 yr. GNMA 3.5: @9:30 103.73 -4 bp (+1 bp from 9:30 yesterday)

Dollar/Yuan: $7.0853 +$0.0016

Dollar/Yen: 106.46 +0.02 yen

Dollar/Euro: $1.1066 -$0.0015

Dollar Index: 98.30 +0.13

Gold: $1516.40 +$7.90

Crude Oil: $53.97 -$1.39

DJIA: -104

NASDAQ: -57.90

S&P 500: -14.83

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 23rd, 2019 9:50 AM
Daily Market Analysis

The Jackson Hole symposium begins today. Fed officials are going to be interviewed by media, but it's tomorrow's remarks from Jerome Powell that is the main event. The FOMC minutes yesterday brought to the forefront questioning how much sway Powell actually has over the other Fed officials. Under constant attack from President Trump, and the details in the minutes has some now wondering how strong Powell is within the Fed and in policy setting. A September 0.25% cut in the Federal Funds rate is a done deal according to where interest rates are today. This is certainly not news, but what the world is hoping for is a clearer outlook from the Fed about the economy and the US and global rates at negative levels. There's still no inflation and the economy is hanging in there. The two prime responsibilities the Federal Reserve is charged with; the market debates presently are over whether the US will move into recession as other key economies are now sliding to. With global recession fears growing and bond yields tumbling, this week's gathering is one of the most anticipated in years.

President Trump is still hammering on the Fed for 100 bp deduction in the Federal Funds rate to keep the economy strong. If the Fed were to cut the Federal Funds rate in September as will happen and then another cut in December that is increasingly being thought, that would bring the total to 0.75% cut this year. In the meantime, time Trump talks about cutting capital gains and employment taxes on Monday then yesterday says he doesn't see the need now with strong economic outlooks.

Weekly jobless claims continue to reflect a strong labor market; claims last week declined 12K to 209K. Traders don't give claims much attention these days with jobs so plentiful.

Does the recent very short inversion in the yield curve between the 2 and 10 yr. notes signal a recession? There isn't any sustained inversion taking place now between the two. The slope of the yield curve has been flattening for 20 years. The Richmond Fed commenting that the inversion is likely to occur more often now with a flatter curve, "even if the risk of recession has not increased at all."

At 9:30 am ET the DJIA opened +86, NASDAQ +21, S&P +9. 10 yr. 1.61% +2 bps. MBS prices at 9:30 -2 bps from yesterday's close and -5 bps from 9:30 yesterday. Yesterday many of the lenders worsened prices much more than what MBSs were trading.

At 10:00 am ET July leading economic indicators expected +0.2% but reported +0.5%.

Whatever the chatter today, it's meaningless ahead of Powell's remarks tomorrow. This Jackson Hole conflab is the most interesting in many years. The world is hanging on doubt about central banks and hoping no economic pullback will occur as long as central banks are in charge. Germany and other economies at negative rates that haven't helped their economies. In fact, Germany's growth is declining for the first in years. Can central banks force increased spending by businesses and consumers? It doesn't look like it. In the US, it is the consumer holding things together while manufacturing is stumbling. The US budget deficit is growing and will exceed $1 trillion in fiscal 2020; this year, the budget will come close at about $980B. The deficit will work against talks of infrastructure spending or tax cuts. Sometimes it looks as if the world is rapidly sinking with everyone running to get a life jacket.

PRICES @ 10:00 AM

10 yr. note: 1.58% unch

5 yr. note: 1.47% unch

2 Yr. note: 1.57% unch

30 yr. bond: 2.07% unch

Libor Rates: 1 mo. 2.166%; 3 mo. 2.147%; 6 mo. 2.025%; 1 yr. 1.954% (8/21/19)

30 yr. FNMA 3.5: @9:30 102.50 -2 bp (-5 bp from 9:30 yesterday)

15 yr. FNMA 3.0: @9:30 102.35 -3 bp (+2 bp from 9:30 yesterday)

30 yr. GNMA 3.5: @9:30 103.78 +2 bp (+9 bp from 9:30 yesterday)

Dollar/Yuan: $7.0825 +$0.0194

Dollar/Yen: 106.38 -0.24 yen

Dollar/Euro: $1.1094 +$0.0007

Dollar Index: 98.10 -0.20

Gold: $1512.40 -$3.20

Crude Oil: $55.88 +$0.20

DJIA: 26,319.36 +116.33

NASDAQ: 8033.10 +12.89

S&P 500: 2932.01 +7.58

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 22nd, 2019 8:45 AM
Daily Market Analysis

Today markets get the first of two key events this week; the minutes from the July FOMC meeting at 2:00 pm ET this afternoon, the second will be Friday with Jerome Powell’s speech at Jackson Hole. Interest rate markets have been generally quiet and unchanged for the past week waiting for new info and relieving the technically overbought conditions. On the minutes, a lot has happened in the world since the meeting ended three weeks ago and may make the account seem a little stale but investors will as ever be on the lookout for fresh monetary clues. Economists are more likely to focus on Friday’s speech by Fed Chair Jerome Powell at the Jackson Hole symposium.

More stimulus from the Fed and other central banks will dominate the Jackson Hole get together. Central banks are approaching a kind of panic as the world’s economies are declining and now the weakest since 2008. The Fed is seen by most cutting the Federal Funds rate two more times this year, next month and again in December. If two more cuts happen that would be a total of 0.75% this year. Lowering the Federal Funds rate by 0.50% next month is not likely. To cut that severely would work against the intended effect by adding more fears about a recession, suggesting the Fed is more concerned than what it wants to imply. Beside Jackson Hole, the G7 leaders, with US President Donald Trump among them, will hold talks in the French resort of Biarritz over the weekend and Monday.

Germany auctioned a 30-year bond this morning with a 0% coupon for the first time as the country tests the demand for haven assets; it went with a record low yield of -0.11%. Germany’s economy is contracting recently and is looking at increasing fiscal spending although, this would only likely be done in reaction to an actual recession, rather than to try to stop one happening.

Weekly MBA mortgage applications this morning a little soft but after the massive increase in apps last week (+21.7% overall, +2.0% purchases and +37% on refinances) the decline was expected. The overall down 0.9%, purchases though down 4.0% while refinances +0.4%. This is, of course, a refinance market; a battle between the big bank servicers and originators. MBA said there were more refinance apps in over three years as 30-year borrowing costs slipped to their lowest levels since late 2016. The refinancing share of total applications grew to 62.7%, the biggest since September 2016, from 61.4% a week earlier.

At 9:30 the DJIA opened +229 after dropping 173 yesterday; NASDAQ +73, S&P +25. 10 yr. 1.58% +3 bps from yesterday. MBS prices -6 bps from yesterday and -11 bps from 9:30 yesterday.

At 10:00 am ET July existing home sales thought to be 5385K; sales at 5420K, +2.5%, yr./yr. +0.6%. June revised better to 5290K from 5270K. In June yr./yr. -1.9%.

Interest rates will stay very still now until the 2:00 pm release of the FOMC minutes. Technically the 10 yr. at 1.59% is at its 20 day moving average. The last time the 10 yr. moved above the 30 day was back on July 10th and then a week later this major rally began. We continue to look for more consolidation in rates, but that view is tenuous with Powell’s remarks on Friday and the G7 leaders meeting in France this weekend. The broader look remains solidly bullish with central banks driving rates more negative and QE stimulus also being considered.

PRICES @ 10:00 AM

10 yr. note: 1.58% +3 bp

5 yr. note: 1.45% +3 bp

2 Yr. note: 1.53% +3 bp

30 yr. bond: 2.05% +2 bp

Libor Rates: 1 mo. 2.170%; 3 mo. 2.149%; 6 mo. 2.023%; 1 yr. 1.948% (8/20/19)

30 yr. FNMA 3.5: @9:30 102.55 -6 bp (-11 bp from 9:30 yesterday)

15 yr. FNMA 3.0: @9:30 102.33 -12 bp (-8 bp from 9:30 yesterday)

30 yr. GNMA 3.5: @9:30 103.70 -2 bp (-6 bp from 9:30 yesterday)

Dollar/Yuan: $7.0638 +$0.0032

Dollar/Yen: 106.44 +0.21 yen

Dollar/Euro: $1.1098 unch

Dollar Index: 98.18 unch

Gold: $1511.80 -$3.90

Crude Oil: $57.01 +$0.90

DJIA: 26,207.52 +258.78

NASDAQ: 8029.39 +80.83

S&P 500: 2924.47 +23.96

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 21st, 2019 9:24 AM
Daily Market Analysis

Marking time; yesterday the 10 yr. yield increased 6 bps, in early morning trading today it is down 5 bps. US stock indexes at 8:00 am ET generally unchanged from yesterday’s improvements.

No direct data or news this morning that can be attributed to the movements in stocks or bonds. Markets are prepping today for the release of the FOMC minutes from the July meeting. Kind of a balanced Fed if comments are to be considered; Federal Reserve Bank of Boston President Eric Rosengren continued to push back against further interest-rate cuts by the central bank, arguing he’s not convinced that slowing trade and global growth will significantly dent the US economy. Within the Fed, FOMC members are thinking what to do when the meeting occurs on Sept 18th.

It isn’t news, but the world is running head-long to push rates lower, lower rates force the currency of the country lower, an attempt to offset tariffs and attract increases in exports. The US dollar continues to increase, if the Fed lowers the Federal Funds rate by 0.25% as expected and ducks the call for 0.50% cut the dollar will remain strong and work against the economy. Dollar strength is a drag on US exports that continue to work against the manufacturing sector that is losing momentum. In the news this morning more economists are expecting Canada will have to cut its rates soon, according to some Canada may lower rates in Sept.

Inflation not increasing has world economists confused, why isn’t inflation moving up, even a little? Could it be as simple as the world is producing more goods than can be absorbed, keeping prices from increasing as global trade wars smolder? Makes me wonder just how fragile the US and global economies really are. We mentioned yesterday for example that in Denmark mortgage rates are now -0.5%; we will pay you to borrow money.

At 9:30 the DJIA opened -37, NASDAQ -13, S&P -5. 10 yr. at 9:30 1.55% -6 bps. MBS prices +5 bps from yesterday and +5 bp from 9:30 yesterday.

Markets marking time ahead of the FOMC minutes tomorrow and on Friday Jerome Powell’s opening remarks at Jackson Hole, a gathering that many hope will surface clues to the Fed’s next move. President Trump is saying the US economy is slowing and blaming it on the Fed’s reluctance to go all in and lowering rates more rapidly and still chastising Powell and the Fed on increasing rates last Dec. Investors and economists are now beginning to lay some blame on Trump for his interagency in trade talks that are damaging the US as well as most of the world’s key economies. It is a race to the bottom in today’s world; negative rates are increasing. Like the drowning man helplessly grabbing at the preverbal straw.

Movements in the markets until the end of the week are suspect and driven by hope and fear; what will the take away be from the minutes tomorrow and what comes from Jackson Hole. The interest rate markets remain positive and will continue to be so unless the 10 yr. note exceeds 1.75%, a 20 bp range that could test the resolve. If the Fed were to cut 0.50%, or if that becomes the consensus after Friday interest rates will continue to fall, the 10 yr. dropping to 1.30%. So far the 10 yr. and MBSs are sitting very close their best closing levels; the 10 best close 1.53%, now 1.55%.

PRICES @ 10:00 AM

10 yr. note: 1.55% -6 bp

5 yr. note: 1.42% -6 bp

2 Yr. note: 1.50% -5 bp

30 yr. bond: 2.04% -5 bp

Libor Rates: 1 mo. 2.168%; 3 mo. 2.151%; 6 mo. 2.029%; 1 yr. 1.953% (8/19/19)

30 yr. FNMA 3.5: @9:30 102.66 +5 bp (+5 bp from 9:30 yesterday)

15 yr. FNMA 3.0: @9:30 102.41 -2 bp (-8 bp from 9:30 yesterday)

30 yr. GNMA 3.5: @9:30 103.75 +5 bp (-2 bp from 9:30 yesterday)

Dollar/Yuan: $7.0606 +$0.0099

Dollar/Yen: 106.39 -0.24 yen

Dollar/Euro: $1.1085 +$0.0005

Dollar Index: 98.42 +0.08

Gold: $1516.90 +$5.30

Crude Oil: $55.42 -$0.79

DJIA: 26,053.57 -74.77

NASDAQ: 7970.46 -32.35

S&P 500: 2907.24 -16.41

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 20th, 2019 8:32 AM
Daily Market Analysis

Interest rate markets opened in the US with some volatility; the 10 yr. overnight increased from 1.55% on Friday to 1.61% at 7:00 am ET. By 8:30 am 1.59% with MBS mortgage prices opened down just 6 bps from Friday morning prices. The consolidation is continuing in the rate markets after the declines over the last three weeks. The longer look remains positive for interest rates. The stock indexes starting higher in the futures markets this morning.

There are no economic releases today, none tomorrow. This week has only three data points for consideration; July existing and new home sales and the Fed Beige Book. This is Jackson Hole week with global central bankers, economists and other key financial leaders. They will start circling on Thursday with the official start Friday with a welcome address from Jerome Powell. There's some speculation that he will use the opening remarks to add to the rate cut outlook next month; unless he wants to send a message of a 0.50 cut any remark about Fed policy is redundant.

Not a lot of market-moving news today or over the weekend. This morning Wilbur Ross Commerce Sec. downplaying concerns over a looming recession after the US Treasury yield curve temporarily inverted last week for the first time in 12 years. Last week for about 30 minutes the 2 yr. note rate exceeded the 10 yr.; the markets and news made a huge issue of it; recession worries grew faster than dandelions. That was last Wednesday, the rest of the week the bump kept analysts and pundits aghast about it; oh, my the US is going to recess. Shows how nervous markets are presently; doesn't take much to spook investors. "Eventually there'll be a recession, but this inversion is not as reliable, in my view, as people think," Ross said in an interview with Fox Business Network. Ross also reminded how Trump isn't happy with Fed monetary policy keeping rates higher and keeping the dollar too strong. In the world of currencies all country's want their currency to weaken, especially here in the US, and of course China.

Germany is now in a recession according to the Bundesbank. The German economy could have continued to shrink over the summer as industrial production drops amid a dearth of orders, the Bundesbank said today, suggesting that the euro zone's biggest economy is now in a recession(Reuters). Germany's economic slowing, a huge blow to Eurozone outlooks, gave markets a shock last week when its GDP declined.

How about negative mortgage rates? Presently there is $17 trillion of negative debt; move to Denmark. Jyske Bank A/S, Denmark's third-largest lender, announced in early this month a mortgage rate of -0.5%, before fees. Nordea Bank Abp, meanwhile, is offering 30-year mortgages at an annual interest of 0.5%, and 20-year loans at zero. French mortgage rates reached a trough of 1.39% on average in June, German mortgage rates also reached historic lows this year, with the average 10-year loan currently under 1%. Some lenders are offering rates around 0.5%, mortgage rates in the UK, by contrast, have been almost unchanged this year. A resulting surge in demand for homes sent total mortgage debt to $9.41 trillion in the second quarter, surpassing the peak reached during the 2008 financial crisis. Mortgage companies are rushing to keep up with the demand for refinancing: Applications are running at a three-year high.

At 9:30 the DJIA opened +332, NASDAQ +110, S&P +34. 10 yr. at 9:30 1.61% +6 bps. MBS prices -8 bps from Friday and unchanged from 9:30 am Friday.

The bond and stock markets have pretty much discounted all of the current news and worries in the level of current rates and prices. The interest rate sector technically very over-bought; something we have made a point of the last week. It's going to take a week or so the correct the overbought condition. The bigger picture remains bullish, we except rates on the 10 yr. to test 1.30% over the next two months.

This Week's Calendar:

Wednesday,

7:00 am weekly MBA mortgage applications

10:00 am July existing home sales (5385K +3.2%)

2:00 pm Fed Beige Book

Thursday,

8:30 am weekly jobless claims (215K -5K)

10:00 am July leading economic indicators (+0.2%)

Friday,

10:00 am Jerome Powell speaks at Jackson Hole

  • July new home sales (654K -0.2%)

PRICES @ 10:00 AM

10 yr. note: 1.61% +6 bp

5 yr. note: 1.46% +4 bp

2 Yr. note: 1.52% +3 bp

30 yr. bond: 2.10% +9 bp

Libor Rates: 1 mo. 2.172%; 3 mo. 2.135%; 6 mo. 2.016%; 1 yr. 1.945% (8/16/19)

30 yr. FNMA 3.5: @9:30 102.61 -8 bp (unch from 9:30 Friday)

15 yr. FNMA 3.0: @9:30 102.49 -6 bp (-6 bp from 9:30 Friday)

30 yr. GNMA 3.5: @9:30 103.78 -6 bp (+2 bp from 9:30 Friday)

Dollar/Yuan: $7.0503 +$0.0074

Dollar/Yen: 106.56 +0.19 yen

Dollar/Euro: $1.1098 +$0.0007

Dollar Index: 98.25 +0.10

Gold: $1507.40 -$16.20

Crude Oil: $55.81 +$0.94

DJIA: 26,141.84 +155.83

NASDAQ: 7994.17 +98.18

S&P 500: 2920.44 +31.76

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 19th, 2019 9:08 AM
Daily Market Analysis

Stock indexes trading higher in pre-open trading this morning; interest rate markets nudging higher.

July housing starts were weaker than expected; at 1191K against forecasts of 1259K and June starts were revised lower, from 1253K to 1241K; down 4.0% from the June revision. The third month in row starts have declined; July building permits though were better than forecasts at 1336K against 1270K, unlike starts June permits were revised higher to 1232K from 1220K; +8.0% from the revision. Permits at a seven month high provide some positives to the soft housing sector. Some slippage may be due to the Tropical storm Barry that poured a lot of rain across the Southeast. Low mortgage rates are being offset by very high land costs that limit builders building low-end prices and the red tape that strangles developers. The good news is that much of the headline weakness is in multi-family; single-family homebuilding, which accounts for the largest share of the housing market, increased 1.3% to a rate of 876,000 units in July, the highest level in six months. Single-family housing starts rose in the Northeast, West, and Midwest, but dropped 3.9% in the South.

At 9:30 am ET the DJIA opened +171, NASDAQ +70, S&P +20. 10 yr at 9:30 1.56% +3 bps. MBS prices -12 bps from yesterday's close and +11 bps from 9:30 yesterday; yesterday most lenders re-priced better for the morning levels.

At 10:00 am the mid-month U. of Michigan consumer sentiment index expected at 97.5 from 98.4 in July; the index fell to 92.1, a big disappointment for the idea that consumers are the rock holding up the economic expansion.

With the recent market volatility and the growing worries that the US may be moving to a recession, there's talk around that the Fed may lower the Federal Funds rate by 0.50 bps next month rather than 0.25% that is presently discounted in current interest rate levels. We're not sure that 50 is a good idea and the Fed will likely keep 0.25% cut. Too soon to panic and a 0.50 cut would look as if the Fed is signaling its increasing fears for a recession. No question global economies are going to recess, many already in recession. Trade wars are slowing growth and forecasts, most companies have been lowering Q3 outlooks, and central banks are worried, but it is too soon for the Fed to panic. To lower rates 50bps would confirm that the outlook is even worse than is thought now. The yield curve got a lot of press this week when on Wednesday the 10 yr and 2 yr inverted for about 30 minutes, this morning pundits and media still acting as if the inversion is still occurring; the 10 yr at 1.55%, the 2 yr at 1.52%.

So far we have not seen the overbought interest rate markets rebound, we still hold they will soon. The bullish bias will remain intact, but the rebound in treasuries and global rates will increase volatility both in the prices and in the emotional sentiment. Most can't see interest rates moving much lower in the immediate outlook. That said; unless there is a significant improvement in trade talks global economies, including the US, will continue to ease and interest rates will remain at very low levels.

PRICES @ 10:00 AM

10 yr. note: 1.55% +2 bp

5 yr. note: 1.44% +1 bp

2 Yr. note: 1.51% unch

30 yr. bond: 2.00% +4 bp

Libor Rates: 1 mo. 2.182%; 3 mo. 2.123%; 6 mo. 2.014%; 1 yr. 1.932% (8/15/19)

30 yr. FNMA 3.5: @9:30 102.69 -12 bp (+ 11 bp from 9:30 yesterday)

15 yr. FNMA 3.0: @9:30 102.43 -7 bp (+11 bp from 9:30 yesterday)

30 yr. GNMA 3.5: @9:30 103.78 -16 bp (+15 bp from 9:30 yesterday)

Dollar/Yuan: $7.0414 +$0.0074

Dollar/Yen: 106.25 +0.14 yen

Dollar/Euro: $1.1076 -$0.0032

Dollar Index: 98.29 +0.15

Gold: $1525.20 -$6.00

Crude Oil: $54.58 +$0.11

DJIA: 25,716.00 +136.61

NASDAQ: 7849.32 +82.71

S&P 500: 2869.56 +21.96

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 16th, 2019 10:07 AM
Daily Market Analysis

A lot of news and data this morning. China is saying it will retaliate on trade issues because of the 10% increase in tariffs still on the table by September. Although Trump said yesterday, he would wave tariffs on goods that he believes will help the Christmas shopping season. China is planning to push back against proposed US tariffs. The US decision to levy new tariffs “severely violated” the consensus reached previously between President Trump and President Xi Jinping according to remarks from China’s Trade Commission. Global stocks were volatile after Beijing vowed to take “necessary counter-measures” over US plans for a new tariff on Chinese imports, compounding investors’ concerns about weakness in the global economy. Then Wal-Mart reported better earnings and US indexes improved, along with the 8:30 am ET economic data was better than forecasts.

July retail sales expected +0.3% increased 0.7%; ex-auto sales expected +0.4% increased 1.0%; the control group was thought to be +0.3% but increased 1.0%. Sales the best in four months.Q2 productivity forecasts were +1.5% increased 2.3%, unit labor costs though did increase, estimates were for +2.0% but increased 2.4%. August Philadelphia Fed business index was better than expected at 16.8 on expectations of 11.1 but lower than 21.8 in July. Weekly jobless claims increased 9K to 220K; forecasts were for 208K.

The global economies are worsening; not much of a surprise here; we have been warning global weakness and that it would not spare the US. The markets are now beginning to get on board the recession train. Yesterday and again this morning the US 30 yr. bond set all-time new lows in its rate as investors run to adjust portfolios against recession fears. Yesterday the 10 yr. note yield fell below the 2 yr. briefly although by the end of the day the inversion that caused a lot of angst was not inverted. History says an inverted yield curve is a precursor to a recession, but we are not so sure it holds as much predictive accuracy now. Central banks the last 10 yrs. with QEs that distorts historical comparison; nevertheless markets are taking it seriously.

At 9:15 am ET July industrial production forecasts were +0.1% but declined 0.2%; manufacturing, a weak link in the US economy was expected -0.1%, as released -0.4%. Capacity utilization dropped to 77.5% the weakest t since Oct 2017.

At 9:30 the DJIA opened +115, NASDAQ +27, S&P +12. 10 yr. 1.57% -2 bps. MBS prices +6 bps from yesterday’s close and +5 bps from 9:30 yesterday. 15 minutes after the open the indexes reversed and were lower.

At 10:00 am August NAHB housing market index expected at 66 from 65 in July, the index hit at 66. June business inventories expected +0.1%, as released, 0.0%.

Early this morning on the China retaliation comments the 10 yr. dropped to 1.51% at 6.50 am ET then increased to 1.59%, then now back to 1.56%.

PRICES @ 10:10 AM

10 yr. note: 1.58% -1 bp

5 yr. note: 1.48% -2 bp

2 Yr. note: 1.55% -3 bp

30 yr. bond: 2.02% -1 bp

Libor Rates: 1 mo. 2.197%; 3 mo. 2.168%; 6 mo. 2.079%; 1 yr. 2.029% (8/14/19)

30 yr. FNMA 3.5: @9:30 102.59 +6 bp (+5 bp from 9:30 yesterday)

15 yr. FNMA 3.0: @9:30 102.33 +10 bp (+12 bp from 9:30 yesterday)

30 yr. GNMA 3.5: @9:30 103.64 +6 bp (+9 bp from 9:30 yesterday)

Dollar/Yuan: $7.0399 +$0.0155

Dollar/Yen: 106.08 +0.18 yen

Dollar/Euro: $1.1132 -$0.0007

Dollar Index: 97.97 -0.02

Gold: $1526.20 -$1.40

Crude Oil: $54.34 -$0.89

DJIA: 25,533.99 +54.57

NASDAQ: 7777.46 +3.52

S&P 500: 2851.40 +10.80

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 15th, 2019 9:10 AM
Daily Market Analysis

July CPI a little hotter than expected; +0.3% with forecasts of +0.2%; yr/yr +1.8% a bp higher than thought. Core CPI also up 0.3% on _0.2$ estimates; yr/yr +2.2% up 1 bp from expectations. Above the Fed's 2.0% target but it won't change the Fed's decision to lower the Federal Funds rate next month. The core PCE price index rose 1.6% on a year-on-year basis in June and has undershot its target this year. Trade tensions won't lessen, and increased prices are one of the likely outcomes as the US and China are light years away for any meaningful deal. Caught most flat-footed on trade; three months ago most gurus were lining up like lemmings believing a trade pact would be made by now. The list of high-level Wall Street executives were very wrong; now markets have finally seen the light.

Not any better in Hong Kong, another day the airport halted check-ins for remaining departures, local leader Carrie Lam warned that the city risked sliding into an "abyss." Lam defended the police response and warned of long-term consequences to the city from the unrest. The editor-in-chief of China's state-run Global Times said that if the situation in Hong Kong doesn't improve, he thinks China will intervene. The overnight session saw the ninth consecutive weaker yuan fix (7.0326 per dollar) while protests at the Hong Kong airport continued. Singapore reported a qtr/qtr contraction in Q2 GDP, which prompted the government of the trade-dependent city-state to lower its growth forecast for 2019. In Europe, Germany's ZEW Economic Sentiment for August fell to its lowest level since 2011, heightening concerns that Europe's biggest economy is heading for a recession. More evidence that global growth is slowing; likely slowing much quicker than had been expected.

At 9:30 the DJIA opened -25 but immediately turned positive; NASDAQ opened -7 and S&P -4. The soft open lasted all of five minutes before the indexes turned higher after big losses yesterday. The 10 yr at 9:30 am ET unchanged from yesterday and 1.64%. MBS prices unchanged but with stock indexes increasing both the 10 yr and MBS prices quickly changed. At 9:45 am ET the 10 yr at 1.65% +1 bp and MBS prices down 5 bps.

Nothing left on the calendar today. News just being released; the US and Chinese officials are talking by phone. The 10% increase in tariffs announced by Trump that were to be started on Sept first may be delayed on some products until Dec. More talks are scheduled in two weeks. Not sure this is all of the details as it is just coming across. The immediate reaction sent the DJIA +380 points and MBS prices -16 bps from yesterday's close. The first 20 minutes after the 9:30 open has been volatile.

Volatility, as we have said, will continue to be at high levels. China and the US talking again. Interesting how when markets are at extreme conditions as they are presently, when the heat builds on trade concerns someone makes a phone call and leaks it that what was thought 20 minutes prior went into the dump. Hope springs...

PRICES @ 10:10 AM

10 yr. note: 1.68% +4 bp

5 yr. note: 1.56% +7 bp

2 Yr. note: 1.66% +8 bp

30 yr. bond: 2.14% unch

Libor Rates: 1 mo. 2.195%; 3 mo. 2.175%; 6 mo. 2.057%; 1 yr. 1.990% (8/12/19)

30 yr. FNMA 3.5: @ 9:30 102.63 unch (unch from 9:30 yesterday)

15 yr. FNMA 3.0: @9:30 102.28 -5 bp (unch from 9:30 yesterday)

30 yr. GNMA 3.5: @9:30 103.66 -2 bp (-6 bp from 9:30 yesterday)

Dollar/Yuan: $7.0494 -$0.0088

Dollar/Yen: 106.38 +1.08 yen

Dollar/Euro: $1.1190 -$0.0025

Dollar Index: 97.74 +0.36

Gold: $1498.80 -$18.40

Crude Oil: $56.41 +$1.48

DJIA: +382

NASDAQ: +152

S&P 500: +41

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 13th, 2019 9:28 AM
Rates At a Glance
Mortgage Rates
Currently Trending
7 Day Mortgage
Rate Forecast
This Week's
Potential Volatility

Neutral

Neutral

High
(by Sigma Research)
Realtor Report

Foreclosure activity drops through most of U.S. in first half of 2019

It was not that long ago when one could drive through neighborhoods of lovely homes and see "for sale" signs up everywhere, vacant homes, and uncut lawns. The financial crisis causing the foreclosure of millions of homes was a scary time. The good news is that the days of rampant foreclosures resulting in scores of empty homes are thankfully now not even viewable in the rearview mirror throughout most of the nation.

According to a recent ATTOM Data Solutions report, foreclosure filings in the first half of 2019 are down 18% compared with a year earlier. Realtor.com's Clare Trapasso writes that the 296,458 filings in the first six months of the year represented an 82% drop from the worst of the foreclosure crisis in the first half of 2010, quoting the data company's chief product officer, Todd Teta. "Foreclosures are continuing to come down. Homeowners who can't make their payments are able to get out of their debt by selling their homes rather than going through foreclosure. Increased home prices are allowing them to sell the home for more than they owe."

The figures were judged by taking into account default notices, scheduled auctions, and bank repossessions in more than 2,200 counties to come up with its findings.

There are still a few metropolitan areas that are seeing a rise in foreclosure filings and price drops as a result -- a point of interest for potential investors. Teta admits that because of price stabilization and increasing values, however, lenders are becoming more confident when taking a home through a foreclosure, knowing they might easily recoup or minimize their losses by foreclosing and then selling the home.

Source: ATTOM, Realtor, MarketWatch, TBWS

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage Backed Securities (MBS) which are traded in real time, all day in the bond market.  This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events.  When MBS pricing goes up, mortgage rates or pricing generally goes down.  When they fall, mortgage pricing goes up.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning.  Last week the MBS market worsened by -22bps.  This was enough to move rates slightly higher last week. We saw high rate volatility throughout the week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to move mortgage rates this week. 1) Trade War, 2) Domestic and 3) Across the Pond

1) Trade War: The U.S./China trade war continues to be the primary focus of bond traders as we continue to approach the September 1st deadline for the new round of 10% tariffs on $300B worth of Chinese goods. Last week focused on the Dollar/Yuan relationship, and that will continue to be in the spotlight. The Geopolitical situation in Hong Kong is also in focus.

2) Domestic: Last week got PPI, and this week we get the more important CPI as a measure of the consumer side of inflation. We also get a critical retail sales report.

3) Across the Pond: Germany (basically the only economic engine in the Eurozone), will release a very important GDP report that will get a lot of attention, particularly after Great Britain showed a negative GDP on a MOM basis last week. From China, we get retail sales and industrial production.

Central Bank Palooza: Norway and Mexico will have Central Bank meetings on Thursday.

This Week's Potential Volatility: High

Wild times for markets and rates over the last couple of weeks. This week we could see the same kind of volatility as we saw last week. There's nothing on the economic front that can cause volatility until Thursday. However, the trade war and Hong Kong could inject rate volatility into the markets at any time.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 12th, 2019 2:01 PM
Daily Market Analysis

Government interest rates ticking slightly lower this morning; stock indexes overnight under pressure. Protesters in Hong Kong where all flights into and out of the city have been canceled. Hong Kong is boiling. It's important as we have previously noted because it adds more rigidity in China to work toward a trade deal. China has to stand strong for its image that China holds dear. Anti-government protesters peacefully demonstrated at the airport for the fourth day. The protests and riots in Hong Kong that have been going on for a month now is the most serious crisis in decades and presents a serious challenge to Beijing and in turn makes the possibility for a prolonged trade war and global economies more likely to worsen. Reports of Chinese police officers gathering in Shenzhen led to continued concerns that China may crackdown on protests.

Worries are increasing that there will be no trade deal with China anytime in the near future. The trade war is now moving into the currency world. A race to weaken currencies as a counter to the disruption of supply chains are adding increasing concerns in the debt markets that central governments will continue to move toward even lower rates, an attempt to push consumers to spend. It hasn't worked so far, and we see little reason to expect it will. Lending by Chinese financial institutions slumped in July on weakening demand, signaling further economic headwinds from trade tensions with the US and potentially paving the way for more stimulus efforts by Beijing's policymakers. The Federal Reserve will have to decide how it will proceed; given the current rapid drop in US interest rates markets increasing the view of more rate cuts than were expected just a month ago.

Talk this morning in media and markets; is it possible that the US may see negative interest rates? The world is going negative; there is more than $15 trillion in government debt around the world with negative yields. That means, essentially, that savers holding these bonds are paying the government to store their money. If that ever becomes a reality, I hope I am not around to see it. Negative rates in the US would happen in an environment of not just a recession but a depression. All kind of opinions and speculation like what we see today based mostly on fear of the unknown; the unknown ahead is worsening momentarily. We have long mentioned that what we are experiencing now in the US and global markets since 2008 doesn't fit economic models we have relied on for years. The result is money moving into the sovereign debt market; that is fueling the increasing concern that beside the trade war the world may be headed more deeply into a currency war as well.

At 9:30 am AT the DJIA opened -184, NASDAQ -37, S&P -14. 10 yr at 9:30 1.69% -5 bps from Friday. MBS prices at 9:30 +5 bps from Frida's close and -7 bps from 9:30 Friday morning.

This afternoon at 2:00 pm the July Treasury budget is expected at -$87.5B; after this report, there are two more months before the US fiscal year ends; the 2019 deficit is going to approach $1T this year and exceed it in 2020 and 2021.

Most all US economic data this week happens on Thursday. Data is always important, but the events in China and Hong Kong and the anticipation of what may or may not occur with trade, and now currency markets will carry the week.

Mortgage rates are going to decline more although the pace will be much slower than treasuries as has been the case recently. Sovereign debt falling on geopolitical and economic concerns. Refinancing will continue to dominate; about all 30 yr mortgages originated since May and before can refinance and cut payments. We expect rates will continue to decline and cause disruptions in MBS markets.

This Week's Calendar:

Monday,

2:00 pm July Treasury Budget (-$87.5B)

Tuesday,

6:00 am July NFIB small business optimism index (103.0 from 103.3 in June)

8:30 am July CPI (+0.2%, yr/yr 1.7%; core +0.2% yr/yr +21.%)

Wednesday,

7:00 am weekly MBA mortgage applications

8:30 am July import and export prices (imports -0.1%, exports -0.1%; yr/yr imports -2.0%, yr/yr exports -1.2%)

Thursday,

8:30 am weekly jobless claims (208K -1K)

  • August Philadelphia Fed business index (11.1 from 21.8 in July)
  • July retail sales (+0.3%, less autos +0.4%, control group +0.3%)
  • Q2 preliminary productivity and unit labor costs (productivity +1.5%, labor costs +2.0%)

9:15 am July industrial production and capacity utilization ( production +0.1%, cap utilization 77.8%)

10:00 am June business inventories (+0.1%)

  • August NAHB housing market index (66 from 65)

Friday,

8:30 am July housing starts and permits (starts 1260K from 1253K +0.6%; permits 1270K from 1220K +4.0%)

10:00 am U. of Michigan consumer sentiment mid-month index (97.5 from 98.4 in July)

PRICES @ 10:00 AM

10 yr. note: 1.68% - 6 bp

5 yr. note: 1.52% -4 bp

2 Yr. note: 1.60% -2 bp

30 yr. bond: 2.19% -6 bp

Libor Rates: 1 mo. 2.194%; 3 mo. 2.175%; 6 mo. 2.052%; 1 yr. 2.1987% (8/9/19)

30 yr. FNMA 3.5: @9:30 102.63 +5 bp (-7 bp from 9:30 Friday)

15 yr. FNMA 3.0: @9:30 102.28 -4 bp (-18 bp from 9:30 Friday)

30 yr. GNMA 3.5: @9:30 103.70 +2 bp (-8 bp from 9:30 Friday)

Dollar/Yuan: $7.0588 -$0.0036

Dollar/Yen: 105.22 -0.45 yen

Dollar/Euro: $1.1218 +$0.0017

Dollar Index: 97.39 -0.10

Gold: $1516.80 +$8.30

Crude Oil: $55.09 +$0.57

DJIA: 26,094.97 -192.47

NASDAQ: 7896.76 -62.78

S&P 500: 2898.25 -20.40

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on August 12th, 2019 9:01 AM

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