July 11th, 2018 8:55 AM by Richard Sardella MLO.100007700/NMLS 233568
More tariffs on China — $200B more. The reaction sent all global equity markets down including pre-opening trade in US futures markets. At 8:00 am EST the DJIA lost -190. The tariffs are likely to go into effect on August 30th, allowing US businesses to make adjustments. There is a proposed list of thousands of products on which it plans to impose 10% tariffs, ranging from vacuum cleaners and windshield wipers to sterling silver spoons and badger hair. The U.S. omitted some high-profile items like mobile phones. The amount is equivalent of half of US imports from China. The belief of economists and business leaders is this increasing “war” will slow US and global growth. One negative is that China will likely become an antagonist in the negotiations with North Korea.
President Trump is in Brussels for the NATO meeting. He is stirring the pot over Germany’s energy buying from Russia and his attack on NATO members that don’t and have not, contributed their share toward military defense. President Trump accused Germany of being a “captive” of Russia as Western leaders gathered in Brussels for a NATO summit. He told NATO Secretary-General Jens Stoltenberg that Germany was wrong to support a new $11B Baltic Sea pipeline to import Russian gas while being slow to meet targets for contributing to NATO defense spending.
Early this morning the weekly MBA mortgage applications improved; apps +2.5%, purchase apps up a solid 7.0% while refinances dropped 4.0%. Unadjusted, purchase applications were 8% higher than a year ago, making a strong comeback after the prior week's negative year-on-year reading. The refinancing share of mortgage activity fell 2.4 percentage points to the lowest level since August 2008, 34.8%.
At 8:30 am the June PPI was hotter than forecasts; PPI was up +0.3% on estimates of 0.2%, yr/yr +3.4% from 3.1% in May. Core PPI was in line up 03%, yr/yr 2.8% from 2.4% in May. When services are included along with food and energy, PPI increased by 0.3% and yr/yr +2.7% from 2.6% in May. Trade services, which tracks prices at wholesalers and retailers, jumped 0.7% in June on top of May's 0.9% gain. Will these troubling increases be passed on to consumers? Tomorrow June CPI will be released more concerning than PPI. Higher energy prices (+0.8%) and gasoline prices (+0.5%) contributed to the increases.
A new report from the San Francisco Fed is saying the forecasts of stronger growth coming from the tax cuts earlier this year may be “too rosy”. The substance is that fiscal stimulus isn’t as effective when the economy is growing rather than when the economy is in a slump. “The predominant research finding is that the fiscal multiplier is smaller during expansions than during recessions,” economists Tim Mahedy and Daniel Wilson wrote.
This afternoon Treasury is scheduled to auction $22B of 10 yr notes, re-opening the issue from May. Yesterday Treasury sold $33B of 3 yrs, in line with the weakest demands in years. The 10-yr has obvious implications at the long end of the curve including mortgage rates.
Nothing new in the bond and mortgage markets, still holding in narrow ranges regardless of any particular news. This morning’s strong PPI didn’t faze the bond market. The 10-yr is presently smack dab in the middle of the three-week range.
PRICES @ 10:00 AM
10 yr. note: +1/32 (3 bp) 2.85% unch
5 yr. note: -2/32 (6 b) 2.76% +1 bp
2 Yr. note: -2/32 (6 bp) 2.59% +2 bp
30 yr. bond: +2/32 (6 bp) 2.95% unch
Libor Rates: 1 mo. 2.066%; 3 mo. 2.337%; 6 mo. 2.511%; 1 yr. 2.780%
30 yr. FNMA 4.0 July: @9:30 101.83 +2 bp (-5 bp from 9:30 yesterday)
15 yr. FNMA 4.0: @9:30 102.44 -2 bp (-2 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 102.53 -3 bp (-1 bp from 9:30 yesterday)
Dollar/Yen: 111.19 +0.19 yen
Dollar/Euro: $1.1747 unch
Dollar Index: 94.16 +0.01
Gold: $1250.70 -$4.70
Crude Oil: $73.27 -$0.84
DJIA: 24,766.17 -153.49
NASDAQ: 7725.58 -33.62
S&P 500: 2779.70 -14.14
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.