August 9th, 2019 8:42 AM by Richard Sardella MLO.100007700/NMLS 233568
Early today, the interest rate sector was unchanged from yesterday. Yesterday some price gains on MBSs but the treasury curve ended unchanged after some increased volatility through the session.
At 8:30 am ET this morning July PPI added more confirmation that inflation at the wholesale level remains dormant. PPI increased 0.2% as expected, yr./yr. +1.7%. Excluding food and energy (core) the estimates were for +0.2% but declined 0.1%, yr./yr. thought to be +2.4% but reported +2.1%. The 2.1% annual increase was the slowest in two years. PPI-FD less food, energy & trade services down 0.1% on forecasts of +0.2%. Initial reaction pushed the 10 yr. to 1.70% -2 bps as consolidation continues.
Globally China's July PPI decreased 0.3% yr./yr. (expected 0.0%; last 0.0%). July CPI increased 0.4% m/m (expected 0.2%; last -0.1%), growing 2.8% yr./yr. (expected 2.7%; last 2.7%). U.K.'s June GDP was unchanged m/m (expected 0.1%; last 0.2%). Q2 GDP decreased 0.2% qtr./qtr. (expected 0.0%; last 0.5%), but increased 1.2% yr./yr. (expected 1.4%; last 1.8%); June Manufacturing Production decreased 0.2% m/m (expected -0.1%; last 1.4%), falling 1.4% yr./yr. (expected -1.1%; last -0.2%).
Trade News: of course, we know about President Trump’s addition of more tariffs. China stopped buying US farm products in retaliation. The White House is holding off on a decision about licenses for US companies to restart business with Huawei Technologies Co. after Beijing said it was halting purchases. Commerce Secretary Wilbur Ross is holding back any special licenses on Huawei while the tension continues. There are no trade discussions scheduled until September. The rest of this month won’t change things; markets may have a few weeks of calm allowing some cooling of worries in US equity and interest rate markets.
At 9:30 am ET the DJIA opened -70, NASDAQ -39, S&P -9. 10 yr. at 9:30 1.71% -1 bp. MBS prices -2 bp from yesterday’s close but up 15 bps from 9:30 yesterday. MBSs didn’t hold the gains though, by 9:45 -6 bps from yesterday. Yesterday both the 10 yr. and MBSs were volatile through the day, moving up and down before ending the day with gains. Lender pricing has become volatile with some key buyers pricing very weak yesterday morning.
Interest rates continue to hold the recent sharp declines; the Fed is currently expected to cut again in Sept the FOMC meeting. Before last week, the expectations had faded about another cut in Sept when Powell commented at his press conference the Fed wasn’t signaling the beginning of a prolonged period of rate cuts but would focus on global and domestic economic outlooks. After Trump warned more tariffs would be imposed on China, stocks here and globally fell hard as did global interest rates. Presently we don’t expect any major movements in interest rates in either direction, no substantial increases or declines. Both the US and China need to take a breath this month.
PRICES @ 10:00 AM
10 yr. note: 1.71% -1 bp
5 yr. note: 1.54% -1 bp
2 Yr. note: 1.61% -1 bp
30 yr. bond: 2.22% -1 bp
Libor Rates: 1 mo. 2.200%; 3 mo. 2.181%; 6 mo. 2.050%; 1 yr. 2.993% (8/8/19)
30 yr. FNMA 3.5: @9:30 102.70 -2 bp (+15 bp from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 102.36 +1 bp (+10 bp from 9:30 yesterday)
30 yr. GNMA 3.5: @9:30 103.78 -6 bp (+18 bp from 9:30 yesterday)
Dollar/Yuan: $7.0578 +$0.0126
Dollar/Yen: 105.80 -0.27 yen
Dollar/Euro: $1.1197 +$0.0018
Dollar Index: 97.55 -0.07
Gold: $1506.70 -$2.80
Crude Oil: $54.64 +$2.10
DJIA: 26,278.31 -99.88
NASDAQ: 7981.68 -57.47
S&P 500: 2922.15 -15.94
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.