January 11th, 2019 9:51 AM by Richard Sardella MLO.100007700/NMLS 233568
MBS prices yesterday sold down after our 4:00 pm ET prices; at the end of yesterday the Fannie 4.0 30-yr coupon lost 11 bps, 9 bps lower than at 4:00 PM.
This morning MBS prices are improving and the 10-yr note rate is at 2.70%, -3 bp from yesterday. Early trade in stocks, all of the indexes lower (DJIA at 8:30 am EST was down -90).
December CPI was released at 8:30 am and was right in line with estimates. CPI was down -0.1% overall, the core added +0.2%; yr/yr overall added +1.9%, core yr/yr was up +2.2%.
No change in the shutdown. President Trump is standing firm, and Nancy Pelosi is also standing firm; it is a record for the number of days there has been a partial government shutdown. It looks like it will continue for much longer. One of the many problems facing markets is the lack of data. The shutdown is a main news story, but so far there have been no significant damages; the DJIA is up 7.0% since the partial closures. The interest rate markets are experiencing a little support, and rates have inched a little higher recently but are still holding the majority of the decline that began in early November.
Jerome Powell’s commitment to being patient on more rate increases a helping hand for stocks and bonds. This morning’s Dec CPI did not change any perceptions of inflation. It is still very tame and continuing to frustrate economists that hang on the idea that low unemployment always leads to inflation increases. However, CPI core is at +2.2% yr/yr, slightly higher than the 2% the Fed likes…..so far it has been mostly noise. Next Tuesday the December PPI will weigh on the bond market; increasing wholesale prices a leading indicator for CPI in January.
At 2:00 pm the Treasury will report the December budget. The estimates are for a minor deficit in the month of just $12.0B. The November deficit is down -$204.9B and we believe yr/yr budget shortfall will be about $1 trillion pushing the total deficit to $24 trillion ($24,000B).
The 10-yr is holding well. Yesterday at 2.74% the 10-yr found support at its 20-day average and the 9-day RSI also held at the critical 50 level. How equity markets trade is directly impacting the daily changes in the bond and mortgage markets, although rather benign. Our technicals are holding. Even the weakening dollar hasn’t hurt the US bond market as much as might be expected.
PRICES @ 10:00 AM
10 yr. note: +17/32 (53 bp) 2.69% -5 bp
5 yr. note: +8/32 (25 bp) 2.51% -6 bp
2 Yr. note: +2/32 (6 bp) 2.54% -1 bp
30 yr. bond: +29/32 (91 bp) 3.02% -4 bp
Libor Rates: 1 mo. 2.514%; 3 mo. 2.796%; 6 mo. 2.860%; 1 yr. 3.019% (1/10/19)
30 yr. FNMA 4.0: @9:30 101.95 +16 bp (+2 bp from 9:30 yesterday)
15 yr. FNMA 3.5: @9:30 101.46 +8 bp (+3 bp from 9:03 yesterday)
30 yr. GNMA 4.0: @9:30 102.50 +16 bp (+5 bp from 9:30 yesterday)
Dollar/Yuan: $6.7630 -$0.0255
Dollar/Yen: 108.46 +0.03 yen
Dollar/Euro: $1.1463 -$0.0036
Dollar Index: 95.59 +0.04
Gold: $1288.70 +$1.30
Crude Oil: $52.10 -$0.81
DJIA: 23,857.86 -144.06
NASDAQ: 6953.69 -32.38
S&P 500: 2583.57 -13.07
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.