June 11th, 2018 12:38 PM by Richard Sardella MLO.100007700/NMLS 233568
MBS prices traded weaker this morning with the 10-yr yield up 1.5% bps to 2.97%. This week is a busy one. The Summit begins at about midnight tonight and will last just a few hours; according to news reports, both leaders will leave soon after a few hours of meetings in which there will be no others in the room but translators. Anyone expecting any major resolutions to the denuclearization will likely be disappointed, as this meeting is a preliminary pulse check between both countries.
Last week’s G7 meeting was anything but cordial; President Trump had a hand in formulating the ending communique, then refused to sign it after Canada’s Prime Minister Justin Trudeau asserted Canada’s strength and independence and criticized U.S. tariffs on Canadian metals. Extremely unusual that one G7 member failed to sign an ending communique. German Chancellor Angela Merkel said in a TV interview late Sunday that it was “sobering and somewhat depressing” to learn Mr. Trump wouldn’t endorse the final communiqué. NAFTA and trade talks with China are moving into key discussions.
The week kicks off at 11:30 am ET this morning with the $32B 3-yr note auction. Then at 1:00 pm the Treasury will re-open the 10-yr note issued last month to add $22B more. The 10-yr is significant to mortgage rates and the demand for the $22B is going to be interesting given the summit that will begin at about 7:00 pm eastern time and the FOMC, ECB and Bank of Japan meetings; not to overlook the economic calendar that includes CPI, PPI and retail sales as headliners among other data points.
According to the recent reports, at the end of the Summit the president will hold a news conference that will possibly shape markets tomorrow morning in the US. Asian and European markets will be trading well ahead of the US open. President Trump commented this morning that the meeting could “work out very nicely” as officials from both countries sought to narrow differences on how to end a nuclear stand-off on the Korean peninsula. Last night on TV’s 60 Minutes experts said it is likely that North Korea has between 2 and 30 nuclear bombs, plutonium and uranium. North Korea’s people are starving. According to more reports, the North Korean media isn’t expected to report the summit until after it is over and until then many citizens have no idea the meeting has occurred.
Technically we remain neutral, with the 10-yr managing to hold below 3.00%. This is mostly psychological but important; 3.04% is more critical to our work but a sustainable increase over 3.00% is what traders are watching this morning. Fundamentals this week with CPI, PPI, and retail sales also keys for inflation. But the central banks and Powell’s press conference loom over markets.
This Week’s Calendar:
11:30 am $32B 3 yr note auction
1:00 pm $22B 10 yr note auction
North Korea/US Summit
6:00 am May NFTB small business optimism index (105.3 frm 104.8 in April)
8:30 am May CPI (+0.2%, core +0.2%; yr/yr 2.8%, yr/yr core +2.2%)
10:00 am FOMC meeting begins
1:00 pm $1`4B 30 yr bond auction
2:00 pm May Treasury budget (-$144B, April was -$88B)
7:00 am weekly MBA mortgage applications
8:30 am May PPI (+0.3%, core +0.2%)
2:00 pm FOMC policy statement and Fed quarterly forecasts for inflation and GDP
2:00 pm Jerome Powell’s press conference
8:30 am weekly jobless claims (224K +2k)
May retail sales (+0.4%, ex auto sales +0.5%)
May import and export prices (imports +0.5%, exports +0.3%)
10:00 am April business inventories (+0.3%)
8:30 am June Empire State manufacturing index (19.6 from 20.1)
9:15 am May industrial production and capacity utilization (production +0.1% after increasing 0.7% in April; capacity utilization 78.0% unchanged from April)
10:00 am U. of Michigan mid-month consumer sentiment index (98.7 from 98.0 in May)
PRICES @ 10:00 AM
10 yr. note: -4/32 (12 bp) 2.96% +1 bp
5 yr. note: -3/32 (9 bp) 2.80% +2 bp
2 Yr. note: -1/32 (3 bp) 2.51% +1 bp
30 yr. bond: -10/32 (31 bp) 3.11% +2 bp
Libor Rates: 1 mo. 2.134%; 3 mo. 2.326%; 6 mo. 2.488%; 1 yr. 2.740% (6/8/18)
30 yr. FNMA 4.0 June: @9:30 101.48 -11 bp (-19 bps from 9:30 Friday)
15 yr. FNMA 4.0: @9:30 102.60 -2 bp (-2 bps from 9:30 Friday)
30 yr. GNMA 40: @9:30 102.09 -11 bp (-15 bps from 9:30 Friday)
Dollar/Yen: 109.90 +0.46 yen
Dollar/Euro: $1.1806 +$0.0036
Dollar Index: 93.47 -0.10
Gold: $1304.40 +$1.70
Crude Oil: $65.14 -$0.60
DJIA: 25,307.68 -8.85
NASDAQ: 7658.53 +13.02
S&P 500: 2781.71 +2.68
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.