August 9th, 2018 8:45 AM by Richard Sardella MLO.100007700/NMLS 233568
The bond and mortgage markets opened better this morning; at 8:30 am EST July PPI showed less inflation at the wholesale level than was thought. Expected up +0.3%, it remained unchanged; yr./yr. +3.3%, down from 3.4% in June. Core PPI, thought to be +0.3%, up just 0.1%; yr./yr. 2.7% down from 2.8% in June. PPI less the core and trade services though increased 0.3% with expectations at 0.2%; yr./yr. (less the core and trade services) +2.8% up from 2.7% in June. Overall there was no real increase in inflation. Before the report, the 10-yr was at 2.96%, after the report, it went to 2.94%.
Tomorrow’s July CPI offers a better look at inflation; current consensus +0.2%, yr./yr. 2.9%; the core (excluding food and energy) +0.2%, yr./yr. 2.3%. Some say inflation is increasing, but the data shows not much movement. We noted the travails of Bill Gross yesterday making bad bets on inflation increases. He isn’t the Lone Ranger, however. The consensus at the Fed and within most money managers’ offices are also missing out….so far. Inflation will increase as the trade tariffs begin to filter down to consumer prices.
Prior to the open of the stock market the indexes were trading better after PPI; prior to the report the indexes were trading slightly weaker.
Weekly jobless claims were at 213K, -6K against forecasts of 220K. Claims are not much of a factor these days with unemployment so low.
Russia is being smacked down with new sanctions; Congress is working on a bi-partisan bill to hammer Russia for interfering in US elections that will push Trump into a corner after he was chastised heavily for his Helsinki performance, not holding Putin to account for meddling. In the latest broadside, the U.S. State Department said on Wednesday it would impose fresh sanctions by the month’s end after determining that Moscow had used a nerve agent against a former Russian double agent, Sergei Skripal, and his daughter, Yulia, in Britain, something Moscow denies.
At 9:30 am the three stock indexes opened unchanged from yesterday but quickly found a little improvement, although the open will go down as unchanged. The 10- yr. note at 9:30 am was at 2.94%, -2 bps.
Yesterday the Treasury sold $26B of 10s. The auction was not a barn burner, but better than what had been expected by traders. This afternoon the Treasury will complete the quarterly refunding with $18B of new 30-yr bonds. Treasury is increasing borrowing as the shortfall from less taxes, and increased federal spending is increasing the annual deficit and a debt that presently stands at $22 trillion. We expect it to increase another $1.5 trillion through fiscal 2019. Swept into the background the US debt is destined to increase and unlikely to be offset by a better economy and more tax revenue as a result.
PRICES @ 10:00 AM
10 yr. note: +8/32 (25 bp) 2.94% -2 bp
5 yr. note: +3/32 (9 bp) 2.81% -2 bp
2 Yr. note: +1/32 (3 bp) 2.65% -1.5 bp
30 yr. bond: +12/32 (37 bp) 3.09% -2.5 bp
Libor Rates: 1 mo.; 2.063%; 3 mo. 2.340%; 6 mo. 2.517%; 1 yr. 2.827%
30 yr. FNMA 4.0 Aug: @9:30 101.77 +11 bp (+20 bp from 9:30 yesterday)
15 yr. FNMA 4.0: @9:30 102.41 +5 bp (+9 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 102.39 +9 bp (+18 bp from 9:30 yesterday)
Dollar/Yuan: $6.8181 -$0.0181
Dollar/Yen: 110.98 +0.03 yen
Dollar/Euro: $1.1594 -$0.0016
Dollar Index: 95.23 +0.15
Gold: $1222.00 +$1.00
Crude Oil: $67.38 +$0.44
DJIA: 25,583.93 +0.18
NASDAQ: 7902.33 +14.00
S&P 500: 2858.22 +0.52
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.