July 10th, 2019 8:29 AM by Richard Sardella MLO.100007700/NMLS 233568
Interest rates increased yesterday. The 10 yr. ended at 2.07% This morning early the 10 inched up to 2.10% a key near term technical support. MBS prices were down 13 bps yesterday at 8:00 am. At about 8:30 am ..E.T. the rate markets made a rapid reversal and not only recovered the early losses but improved from yesterday. Today there isn’t anything that overshadows Jerome Powell’s testimony at the House Financial Services Committee at 10:00 am. (see below for Powell’s prepared text excerpts).
Weekly MBA mortgage applications for the week ending July 5th; apps declined 2.4%, purchase apps +2.0% while refinance apps dropped 7.0% from the week before. Yr./yr. purchase apps up 6.0%. Mortgage rates last week were generally unchanged with minor choppiness.
This afternoon at 1:00 pm Treasury will auction $24B of 10s, re-opening the 10 yr. issue from May. At 2:00 pm the minutes from the June FOMC meeting, but Powell’s testimony will render the minutes less important than normal.
Some global inflation data: China's June CPI decreased 0.1% m/m, as expected (last 0.1%), but grew 2.7% yr./yr., as expected (last 2.7%). June PPI was unchanged yr./yr. (expected 0.3%: last 0.6%). Japan's June PPI decreased 0.5% m/m (expected -0.3%; last -0.1%), dipping 0.1% yr./yr. (expected 0.4%; last 0.6%). New Zealand's June Food Price Index decreased 0.7% m/m (last 0.7%).
More evidence, if it is necessary, that the global economies are slowing. The European Commission trimmed its forecast for 2020 GDP growth in the euro-zone to 1.4% from 1.5%. The growth forecast for 2019 remains at 1.2%.
U.S. and China re-started trade talks yesterday; according to Larry Kudlow, the White House economic adviser. He said the two sides were talking about a face-to-face meeting, but warned that there was not a magic way to reach what has so far been an elusive deal. Trade talks stalled in May after China backed away from commitments it had made to secure legal changes to its system, according to U.S. officials. An agreeable trade deal is far off from where the two sides stand now; best we can say is ‘at least they are talking again.’
At 9:30 the DJIA opened +117, NASDAQ +52, S&P +14. 10 yr. note 2.05% -2 bps. MBS prices +14 bps from yesterday’s close and unchanged from 9:30 yesterday.
The current general belief before Powell’s testimony is a rate cut of 0.25% on July 31st. Powell likely will accentuate the Fed’s increasing concern about the economic outlook as well as here in the .U.S. Those with opinions are a mixed bag, but the growing consensus now is the Fed will cut again later this year. His prepared opening remarks sent markets higher from weakness prior to the release. Since last month’s meeting, “it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook,” Mr. Powell said in testimony prepared for delivery to the House Financial Services Committee on Wednesday morning. “Inflation pressures remain muted,” he added. “Economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the U.S. economy,” Mr. Powell’s testimony said. “Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and Brexit.”
Extreme volatility in the rate markets this morning; overnight and very early in the U.S. the 10 yr. rate increased to 2.10%, and MBS prices opened -14 bps from yesterday’s decline of 13 bps. At about 8:20 am ET the rate market swung rapidly lower from 2.10% to 2.04% all within five minutes.
PRICES @ 10:00 AM
10 yr. note: 2.07% unch
5 yr. note: 1.86% -2 bp
2 Yr. note: 1.85% -8 bp
30 yr. bond: 2.57% +2 bp
Libor Rates: 1 mo. 2.368%; 3 mo. 2.340%; 6 mo. 2.256%; 1 yr. 2.273% (7/9/19)
30 yr. FNMA 3.5: @9:30 102.27 +14 bp (+1 bp from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 101.92 +14 bp (+4 bp from 9:30 yesterday)
30 yr. GNMA 3.5: @9:30 103.30 +13 bp (+1 bp from 9:30 yesterday)
Dollar/Yuan: $6.8751 -$0.0148
Dollar/Yen: 108.73 -0.12 yen
Dollar/Euro: $1.1240 +$0.0032
Dollar Index: 97.14 -0.35
Gold: $1411.60 +$11.10
Crude Oil: $59.44 +$1.61
DJIA: 26,970.54 +187.55
NASDAQ: 8223.00 +81.70
S&P 500: 3000.75 +21.12
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.