February 6th, 2019 9:24 AM by Richard Sardella MLO.100007700/NMLS 233568
The State of the Union has come and gone. The markets didn't get anything unexpected.
Interest rates are slightly improving this morning following the modest improvements yesterday.
At 7:00 am EST MBA weekly mortgage applications were weaker once again; the composite -2.5%, purchase apps -5.0% while re-finance apps were +0.3%.
The November US trade deficit was less than forecasts. Dropping -$49.3B with estimates of -$54.0B, there was a pullback in imports but not in exports. Imports, reflecting price declines for petroleum as well as a $4.3B drop in consumer goods especially cell phones, fell $7.7B in the month while exports also fell, down $1.3B and largely reflecting oil-related declines for supplies and materials. Looking at the goods to services split, the goods deficit fell $6.7B to $71.6B while the services surplus slipped $0.3B to $22.3B.
More partial data to report; preliminary Q4 productivity and unit labor costs; the manufacturing sector, because of the government shutdown, is the only data available for the fourth quarter. Non-farm productivity was expected +1.6%, unit labor costs expected +1.7%. The third quarter with non-farm productivity shaved 1 tenth to plus 2.2% while unit labor costs remained unrevised at plus 0.9%. Led by strength in durables, manufacturing productivity rose a quarter-to-quarter 1.3% in the fourth quarter which is in line with 1.1 and 1.2 percent gains in the prior two quarters. The fourth-quarter gain reflects a 2.3% rise in output against only a 1.0% increase in hours worked.
At 9:30 am the DJIA opened down -27, the NASDAQ added +6, and the S&P dropped -3. The 10-yr stood at 2.68%, down -2 bps.
At 1:00 pm the Treasury will auction $27B of new 10-yr notes; if it is well bid, expect the rate on the 10 to improve.
We are still tilting toward more rate declines; as noted yesterday and Monday our technical analysis work has been neutral, and yesterday’s and today’s minor improvement is encouraging. Having the 10 under 2.70% is friendly.
PRICES @ 10:00 AM
10 yr. note: +4/32 (12 bp) 2.69% -1 bp (2.68% earlier)
5 yr. note: +3/32 (9 bp) 2.49% -2 bp
2 Yr. note: +2/32 (6 bp) 2.50% -2 bp
30 yr. bond: +8/32 (25 bp) 3.02% -1 bp
Libor Rates: 1 mo. 2.512%; 3 mo. 2.738%; 6 mo. 2.777%; 1 yr. 2.985% (2/5/19)
30 yr. FNMA 4.0: @9:30 102.17 +9 bp (+14 p from 9:30 yesterday)
15 yr. FNMA 3.5: @9:30 101.68 +6 bp (+7 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 102.70 +16 bp (+15 bp from 9:30 yesterday)
Dollar/Yuan: $6.7448 unch (Asian markets closed)
Dollar/Yen: 109.75 -0.21 yen
Dollar/Euro: $1.1386 -$0.0019
Dollar Index: 96.20 +0.13
Gold: $1317.40 -$1.80
Crude Oil: $53.28 -$0.38
DJIA: 25,352.79 -58.73
NASDAQ: 7391.98 -10.10
S&P 500: 2732.65 -5.05
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.