October 8th, 2019 9:42 AM by Richard Sardella MLO.100007700/NMLS 233568
Interest rates lower this morning; overnight though the 10 yr yield did increase from yesterday's US close. At 2:00 am ET this morning, the 10 yr increased to 1.59% +3 bps from yesterday's close. Then the US decided to blacklist some Chinese firms; eight Chinese technology giants on a US blacklist on Monday, accusing them of being implicated in human rights violations against Muslim minorities in the country's far-western region of Xinjiang. The blacklist includes some of China's top artificial intelligence startups. The stock market selling in pre-open trading in the futures on the news. The focus is on limiting exposure to Chinese stocks in government pension funds. China saying, stay tuned for retaliation; human rights issues now in the mix in the trade talks. At 9:00 am ET, the DJIA -180.
At 8:30 am ET Sept PPI is adding more support to the interest rate sector. PPI data a real surprise as it declined and declined quite a lot. PPI expected +0.1%: as released -0.3%, yr/yr expected +1.8% up 1.4%. The core PPI expected +0.2% declined 0.3% and yr/yr thought to be +2.3% was 2.0%. Less food, energy and trade services expectations were +0.2%, as reported 0.0% and yr/yr +1.7% from +1.9% in August. The data was not only a surprise, but normally the forecasts and estimates compared to reality don't deviate as much as what the report showed today.
At 9:30 am ET, the DJIA opened -235, NASDAQ -62, S&P -23. 10 yr note 1.51% -5 bps. MBS prices +13 bps from yesterday's close and +8 bp from 9:30 yesterday.
At 1:00 pm ET this afternoon Treasury will auction $38B of 3 yr notes beginning three days of borrowing. Tomorrow $24B of 10 yr notes will be auctioned, the term 9 yrs and 10 months re-opening the issue from August.
At 2:00 pm ET this afternoon, Jerome Powell speaking at the 61st National Association of Business Economics Annual Meeting in luncheon remarks entitled "A View from the Federal Reserve Board of Governors" in Denver, Colorado.
President Trump is pulling the US out of Syria, letting the Kurds alone to defend against ISIS; it is news, and some are quite disturbed, but markets are not being directly affected. The new blacklists on China's tech companies is an increase in the US attempts to keep China's tech industries from growing. The trade discussions that are set to begin again on Thursday are not going to progress as might had been expected two days ago. Yesterday, Larry Kudlow pledged that there would be no connection between President Donald Trump's request that China investigate the Bidens and the renewed trade deal talks between the two global superpowers. "The president's view is there is no linkage between that and the trade talks," Kudlow told reporters on the White House driveway. "I guarantee there will be no linkage..."
Impeachment testimony continues in closed doors; still, mostly a news story that hasn't involved reactions within markets.
Interest rates continue to decline this morning pushed lower by the issues with China, and the belief the trade talks that begin on Thursday will not move the ball forward. Also, the weak PPI data this morning that, at least momentarily, will encourage the Fed to cut the Federal Funds rate at the FOMC meeting on Oct 29th and 30th. All of our technical analysis is bullish now. Next week the IMF will issue its forecast, and it will be weaker than the last forecast.
PRICES @ 10:00 AM
10 yr. note: 1.51% -5 bp
5 yr. note: 1.34% -4 bp
2 Yr. note: 1.42% -4 bp
30 yr. bond: 2.01% -4 bp
Libor Rates: 1 mo. 1.940%; 3 mo. 2.012%; 6 mo. 1.960%; 1 yr. 1.867% (10/7/19)
30 yr. FNMA 3.0: @9:30 101.97 +13 bp (+8 bp from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 102.46 -1 bp (+8 bp from 9:30 yesterday)
30 yr. GNMA 3.0: @9:30 103.19 +6 bp (+10 bp from 9:30 yesterday)
Dollar/Yuan: $7.1443 -$0.0042
Dollar/Yen: 106.92 -0.33 yen
Dollar/Euro: $1.0972 unch
Dollar Index: 98.99 unch
Gold: $1512.00 +$7.90
Crude Oil: $52.09 -$0.69
DJIA: 26,175.48 -302.54
NASDAQ: 7838.57 -117.52
S&P 500: 2900.17 -38.62
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.
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.