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Daily Market Analysis April 12, 2019

April 12th, 2019 9:31 AM by Richard Sardella MLO.100007700/NMLS 233568

Daily Market Analysis

Interest rates this morning started out higher. The 10-yr was at 2.54%, up +5 bps from yesterday and once again pushing 2.55%, the key technical support. In pre-open stock indexes on a strong rally, the DJIA added +205 points at 8:00 am ET. Credit growth in China and the first major U.S. bank earnings both beat expectations. China reported better-than-expected lending growth, signaling a further firming of its weak economic recovery, and China's March trade surplus totaled $32.65B (expected $7.05B; last $4.08B). March Imports fell 7.6% yr/yr (expected -1.3%; last -5.2%) while Exports grew 14.2% yr/yr (expected 7.3%; last -20.8%). March new loan creation totaled CNY1.69 trillion (expected CNY1.20 trillion; last CNY885.80B) while outstanding loans grew 13.7% yr/yr (expected 13.4%; last 13.4%)

The shift in sentiment in the bond market solidified after JPMorgan Chase & Co. said adjusted revenue for the first quarter beat analyst estimates. Wells Fargo & Co. reported a 16.4% increase in quarterly profit on Friday.

Interest rates in Europe are increasing, pulling the US 10-yr note higher; Germany’s 10-year yield gained four basis points to 0.03% on the biggest advance in more than a week. Britain’s 10-year yield rose four basis points to 1.187%.

The G-20 finance ministers are meeting today in Washington; Japan’s finance minister saying that Japanese firms are eager to invest in the U.S. and that trade between the two countries will be expanded. Germany, according to reports, is about to lower its growth forecasts to +0.5% from +1.0%. Eurozone February Industrial Production decreased 0.2% m/m (expected -0.5%; last 1.9%) and was down 0.3% yr/yr (expected -1.0%; last -0.7%).

All of what is outlined above are key news reports today. The only thing we are looking at are Q1 earnings that will continue to escalate for the next month. Earnings are always significant, but with the stock market pushing record highs against what is widely believed to be a slowing in the economy, the results of Q1 earnings will either make or break overall outlooks. So far this week is about bank earnings. Those that have reported have beaten Street estimates.

At 8:30 am ET March import prices, expected +0.4% increased 0.6%; yr/yr imports expected -0.6% were unchanged (0.0%). When excluding food and also fuels where prices rose a sharp 6.4% in the month, the reading falls into the negative column at minus 0.2%. And prices of imported finished goods -- whether capital goods or consumer goods or vehicles -- remain flat to slightly negative for both the monthly and yearly comparisons. Export prices were thought to be +0.3% increased 0.7%, yr/yr +0.6%. This data, along with yesterday's similar results for producer prices, offset to Wednesday's moderation for the core rate in the consumer price report. (March PPI +0.6%, yr/yr +2.2%; excluding food and energy +0.3%. yr/yr +2.4% with forecasts of +2.5%. Excluding food, energy and trade services yr/yr +2.0% down from 2.3% in Feb). Nothing to worry over about on inflation concerns. Still holding about 2.0%.

Yesterday St. Louis Fed President James Bullard said policy normalization ended at the March FOMC meeting and that the inflation target is likely to be missed once again this year (lower than the Fed’s 2.0% target). Fed Vice Chair Richard Clarida said that even though the U.S. economy is slowing, he is almost certain the current expansion will become the longest on record.

Also yesterday Federal Reserve Bank of New York leader John Williams said he is fine with where central bank monetary policy stands. His comments also indicated the economy was probably not as weak at the start of the year as many had expected. “I don’t have any worries on financial stability right now and worries about inflation pressures getting red hot, so we do have this space to be both patient about our policy stance and...to adjust it if needed.”

At 9:30 amthe DJIA opened up +215, the NASDAQ added +37, and the S&P increased by +15. The 10-yr stood at 2.54% +5 bp.

At 10:00 the University of Michigan consumer sentiment index was expected at 98.0 from 98.4 in March. As reported the index declined to 96.9.

Technically the 10-yr and the rest of the curve is at critical levels with the 10 at 2.55% this morning. The recent increase in interest rates is all about the increasing value of stocks, both here and China; no inflation but money moving away from sovereign debt (treasuries) and pushing MBS prices down (higher rates).

PRICES @ 10:00 AM

10 yr. note: -16/32 (50 bp) 2.55% +5 bp

5 yr. note: -10/32 (31 bp) 2.38% +7 bp

2 Yr. note: -3/32 (9 bp) 2.40% +4 bp

30 yr. bond: -24/32 (75 bp) 2.96% +4 bp

Libor Rates: 1 mo. 2.472%; 3 mo. 2.596%; 6 mo. 2.631%; 1 yr. 2.734% (4/11/19)

30 yr. FNMA 4.0: @9:30 102.52 -12 bp (-12 bp from 9:30 yesterday)

15 yr. FNMA 3.5: @9:30 102.12 -13 bp (--10 bp from 9:30 yesterday)

30 yr. GNMA 4.0: @9:30 103.09 -8 bp (- 8 bp from 9:30 yesterday)

Dollar/Yuan: $6.7054 -$0.0140

Dollar/Yen: 111.95 +0.30 yen

Dollar/Euro: $1.1314 +$0.0060

Dollar Index: 96.82 -0.34

Gold: $1294.70 +$1.40

Crude Oil: $64.20 +$0.62

DJIA: 26,405.16 +262.11

NASDAQ: 7983.52 +36.16

S&P 500: 2908.40 +20.08

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.

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Posted by Richard Sardella MLO.100007700/NMLS 233568 on April 12th, 2019 9:31 AM

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