June 12th, 2017 9:02 AM by Richard Sardella MLO.100007700
This is a big week for the US financial markets. The headliner is the FOMC meeting, Yellen’s press conference and the Fed’s quarterly forecasts for inflation and GDP over the next two years. The economic calendar also flush with key data and Treasury will auction $56B of notes and bonds. This morning in early trade the 10 yr note yield +1 bp to 2.22%, early trade in MBSs -3 bps from Friday’s close.
On Wednesday the Fed will increase the federal funds rate by 0.25%, that is already discounted in markets. The issue, or question, is what the policy statement and Janet Yellen will frame for markets to estimate a possible increase in Sept. The level of inflation is presently not an issue for the Fed, running lower than the Fed’s 2.0% target. It more likely falls on whether the Fed thinks the economy may be overheating based on how equity markets have performed this year. In the WSJ this morning front page article about how the Fed is increasingly concerned that financial markets are over-extended. Interest rates falling after the Fed has increased rates four times over the last two years and the stock exchange very over-bought. Even the most bullish funds and large investor firms are in agreement, but no one appears to be the first to jump ship. Last Friday the NASDAQ down 114 points, the largest decline in many months but the DJIA +89.
Crude oil trading higher this morning, recovering some of the massive declines over the last ten sessions. Gold lower. The dollar index about unchanged but the dollar is weaker against the yen and euro currency. Should be a quiet one today with only the Treasury auctions, although the demand for the 10 yr will be of particular interest for mortgage rates. The FOMC and Yellen on Wednesday then a heavy data calendar on Thursday have the potential for increased volatility. Over the last couple of weeks, bond market volatility has been low. In the equity markets, volatility is almost zero suggesting investors and markets, in general, are too complacent now.
This Week’s Calendar:
Monday, June 12
11:30 AM $24B 3 yr note auction
1:00 pm $20B 10 yr note auction
8:30 am May PPI (+0.1%, ex food and energy +0.2%)
10:00 am FOMC meeting begins
1:00 pm $12B 30 yr bond auction
7:00 pm weekly MBA mortgage applications
8:30 am May retail sales (+0.2%, ex-auto sales +0.2%)
May CPI (0.0%; ex food and energy +0.2%)
10:00 and April business inventories (-0.1%)
2:00 pm FOMC policy statement
2:30 Janet Yellen press conference
8:30 am weekly jobless claims (242K -3 K)
May import and export prices (imports 0.0%; exports +0.1%)
June Philadelphia Fed business index (27.0 from 38.8)
June Empire State manufacturing index (6.0 from -1.0)
9:15 am May industrial production and capacity utilization (production +0.2%, capacity 76.8% from 76.7%).
8:30 am May housing starts and permits (starts 1221K +4.0%; permits 1249K +2.6%).
10:00 am June U. of Michigan prelim consumer sentiment index (97.1 from 97.1 at the end of May).
PRICES @ 10:10 AM
10 yr note: -4/32 (12 bp) 2.21% +0.50 bp
5 yr note: -2/32 (6 bp) 1.78% +0.50 bp
2 Yr note: -1/32 (3 bp) 1.35% unch
30 yr bond: -7/32 (22 bp) 2.87% +1 bp
Libor Rates: 1 mo 1.127%; 3 mo 1.236%; 6 mo 1.416%; 1 yr 1.728%
30 yr FNMA 3.5 July: @9:30 102.97 -8 bp (-8 bp from 9:30 Friday)
15 yr FNMA 3.0: @9:30 103.05 -2 bp (+4 bp from 9:30 Friday)
30 yr GNMA 3.5: @9:30 104.05 -5 bp (-19 bp from 9:30 Friday)
Dollar/Yen: 109.84 -0.49 yen
Dollar/Euro: $1.1209 +$0.0013
Dollar Index: 97.23 -0.01
Gold: $1269.30 -$2.10
Crude Oil: $46.41 +$0.58
DJIA: 21,217.56 -54.41
NASDAQ: 6126.50 -81.42
S&P 500: 2422.64 -9.13
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.