January 9th, 2020 9:24 AM by Richard Sardella MLO.100007700/NMLS 233568
The equity market improving on a relief rally that there isn't going to be anymore near term concerns with Iran. Iran's missile attack is now understood to be a face-saving action to soothe the resentment in Iran by the loyalists. Adding to the face-saving, the Iranian press has reported that 81 Americans were killed by the attack on US installations in Iraq. Iran will continue to be a focus, but not at the level that existed moments after the US drone attack.
Nancy Pelosi said Congress might vote today on a war powers resolution that will direct President Trump to terminate the use of the US military against Iran unless Congress has declared war or passed an authorization for the use of force against it. The resolution is expected to easily pass the House, but would face a more difficult time in the Senate, which is controlled by the Republicans.
The initial reaction took the 10 yr. note down to 1.71% at 7:30 pm ET Tuesday evening. By yesterday's close, the 10 yr. ended 1.86%. MBS prices crumbled yesterday and early this morning more selling. At 8:30 am ET, MBS prices down 9 bps from yesterday's close.
No economic data today except weekly jobless claims, expected at 219K was better at 214K -9 bps from the prior week. Pre-open stock indexes better this morning, while stocks rose across Europe and Asia, extending a relief rally on bets America and Iran, have stepped back from a deeper military conflict.
With the Iran situation at relative calm now, traders will focus more on tomorrow's Dec employment data. On the trade front, China announced its vice premier will travel to Washington to sign the first phase of the trade deal with the US next week.
What does the Fed think now? We have four Fed officials out today; Richard Clarida, John Williams, James Bullard, and Charles Evans. We are not looking for any of them to comment directly on Iran other than to agree that stepping back is welcome and necessary.
At 1:00 pm, ET Treasury will auction $16B of 30s. Yesterday's 10 yr. auction didn't bid well.
Now that the Iran issue has cooled, markets turning back to fundamentals that the US economic growth will continue to improve. The stock market doesn't appear to have an end to the positive bias, and that view is increasing in the interest rate sector. That said, interest rates are generally confined in a narrow range with not much movement.
PRICES @ 10:00 AM
10 yr. note: 1.89% +2 bp
5 yr. note: 1.69% +2 bp
2 Yr. note: 1.61% +2 bp
30 yr. bond: 2.37% +1 bp
Libor Rates: 1 mo. 1.677%; 3 mo. 1.834%; 6 mo. 1.874%; 1 yr. 1.951% (1/08/20)
30 yr. FNMA 3.0: @9:30 101.39 -11 bp (-32 bp from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 102.49 -10 bp (-24 bp from 9:30 yesterday)
30 yr. GNMA 3.0: @9:30 102.44 -11 bp (-37 bp from 9:30 yesterday)
Dollar/Yuan: $6.9525 +$0.0062
Dollar/Yen: 109.47 +0.34 yen
Dollar/Euro: $1.1110 +$0.0003
Dollar Index: 97.43 +0.13
Gold: $1550.70 -$9.50
Crude Oil: $59.26 -$0.35
DJIA: 28,876.03 +130.94
NASDAQ: 9196.79 +67.64
S&P 500: 3268.27 +15.22
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.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.