August 8th, 2019 9:03 AM by Richard Sardella MLO.100007700/NMLS 233568
Once a market becomes technically over-extended as the stock and bond market are now you can expect the news to change. This morning the interest rate markets are increasing, and stock indexes are better. The "news", stocks around the world rose as stronger-than-expected Chinese trade data, and upbeat indicators in Europe eased concerns about a sharp deterioration in the global economic outlook. The lead paragraph in today's WSJ. Has anything changed? No. Things are the same as they have been all week, but media has to have a reason other than simply overbought (interest rates) or oversold (stocks).
The European Central Bank's latest Economic Bulletin commented on the rising risk of a broad-based deterioration in global growth expectations due to weak services output in Q2. However, the bulletin noted that economic indicators continue pointing to employment growth and steady consumption growth. China's July trade surplus totaled $45.06B (expected $40.00B; last $50.98B). July imports fell 5.6% yr./yr. (expected -8.3%; last -7.3%) while exports increased 3.3% yr./yr. (expected -2.0%; last -1.3%).
China's central bank set the daily fixing of the Yuan stronger than analysts expected, providing some reassurance that rattled markets this week. The fixing has become a closely-watched event after a weak reference rate on Monday triggered the biggest loss in the Yuan since 2015. Trump has threatened to impose more tariffs on Chinese goods, and the PBOC could loosen its monetary policy to aid growth. The PBOC's reference rate is going to continue to be closely watched by traders and central bankers now.
Weekly jobless claims down 8K last week to 209K; jobs still strong.
At 9:30 the DJIA opened +124, NASDAQ +62, S&P +17. 10 yr. at 9:30 1.76% +4 bps. MBS prices -12 bps from yesterday’s close and -30 bps from 9:30 yesterday.
The rebounds in the markets are mostly due to technically over-extended movements. The fundamentals that sent the markets in huge moves still exist. The wider perspective for the 10 yr. will remain positive as long as it doesn't exceed 1.90%. We expect a period of consolidation now to digest the news that has cracked markets since last Thursday when Pres. Trump unexpectedly announced he was ready to add 10% new tariffs on $300B of Chinese exports to the US. There are no trade talks until September suggesting there has been no progress in talks. Markets now re-thinking the idea of a quick trade deal; given what we the people know a trade agreement won't happen this year or may not happen next year. A moving target that is likely to be volatile.
This afternoon Treasury will auction $19B of 30s, yesterday's 10 yr. auction, if graded like school, got an F; it was poorly bid, the demand weak.
PRICES @ 10:00 AM
10 yr. note: 1.76% +4 bp
5 yr. note: 1.57% +4 bp
2 Yr. note: 1.63% +2 bp
30 yr. bond: 2.29% +6 bp
Libor Rates: 1 mo. 2.211%; 3 mo. 2.184%; 6 mo. 2.047%; 1 yr. 1.977% (8/7/19)
30 yr. FNMA 3.5: @9:30 102.55 -12 bp (-30 bp from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 102.26 -1 bp (-21 bp from 9:30 yesterday)
30 yr. GNMA 3.5: @9:30 103.61 -16 bp (-28 bp from 9:30 yesterday)
Dollar/Yuan: $7.0473 -$0.0129
Dollar/Yen: 106.10 -0.17 yen
Dollar/Euro: $1.1192 -$0.0008
Dollar Index: 97.62 +0.07
Gold: $1505.50 -$14.10
Crude Oil: $52.29 +$1.20
DJIA: 26,136.83 +129.76
NASDAQ: 7938.23 +75.40
S&P 500: 2905.44 +21.46
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.