March 24th, 2020 9:33 AM by Richard Sardella MLO.100007700/NMLS 233568
The stocks are better to start this morning, treasury rates slightly higher, but MBS prices are moving higher. It’s no secret that the MBS markets have been in great turmoil the last month. The holders of those securities selling hard while buyers are hiding in the bushes, the result has been wild price movements throughout the day, and lenders buying new originations are not too interested.
Politicians are trying to work out the bailout money. They are having problems that are primarily political and willing to push for initiatives that have little to do with getting money into people’s hands and agree to provide the Fed with $425B for its incentives the Fed has already announced. The $425B earmarked for the Fed can be leveraged up by the Fed to provide the help needed for businesses, both large and small. No, it isn’t a slush fund as being described by some in Congress. Yes, big business will get help to meet debts they can’t pay, but let’s keep in mind that if those large employers are forced to cut spending, default on loans, and layoff millions, the result would be unthinkable. Small businesses every day move closer to extinction unless they are allowed relief from their lost income, debts, and keep their employees.
According to what we read, there was a “done” deal in Congress last Saturday. On Sunday, Nancy Pelosi decided to put her plan in play, 1400 pages that moved well beyond the current situation, including a lot of social issues Democrats have been advocating. Pelosi’s bill would have broad implications for the financial sector. It would force lenders to grant a temporary reprieve from mortgage and car payments and credit card bills. It would order the Federal Reserve to provide loan servicers with liquidity to allow borrowers to stop paying their mortgages for up to 360 days. Public housing residents would get a reprieve from paying rent, and student loan borrowers would have $10,000 of debt forgiven.
The package of funding will get done, maybe today, according to some ‘in the know.’ Treasury Secretary Steven Mnuchin and Senate Minority Leader Chuck Schumer, who have led the negotiations for Republicans and Democrats, emerged from another set of late-night talks Monday saying they were within striking distance to a deal. “We expect to have an agreement tomorrow morning,“ Mr. Schumer said yesterday, adding that the deal could be worth $2 trillion. “There’s still a few little differences, neither of us think they’re in any way going to get in the way of a final agreement.” “There are still documents that are going to be reviewed tonight and turned around, there’s still a couple of open issues, but I think we’re very hopeful this can be closed out tomorrow,” Mr. Mnuchin told reporters last night.
47,000 chain stores have closed in the last 10 days. Most have pledged to remain closed to the public for at least two weeks, but they may stay closed for much longer. In the same period, small retail businesses throughout the U.S. also hit pause on their physical locations but are not included in this list. “In the space of a week, the retail landscape has changed from being fairly normalized to being absolutely disrupted beyond what we’ve ever seen before outside of the Second World War,” Neil Saunders, managing director of GlobalData Retail, said.
At 9:30 am ET the DJIA opened +1200, NASDAQ +368, S&P +129. 10 yr. note yield +8 bps to 0.86%. FNMA 3.0 coupon at 9:30 +47 bps and 77 bps from 9:30 yesterday.
At 9:45 am ET, the PMI flash index was expected at 44.2 from 49.6 in Feb; manufacturing 43.0 from 50.8 and services at 43.9 from 49.9. As released, the index is at 40.5, manufacturing component better at 49.2, but the service sector weaker at 39.1.
Gold, the safest asset in this crisis, declined the last couple of weeks, not because owners wanted to sell but because they had to meet other debt and the need for cash. Yesterday and this morning has increased $174.00 and now back to where it traded on March 9th.
At 10:00 am ET, Feb new home sales expected at 743K down from 764K in January; sales increased to 765K and January revised to 800K.
Markets will await the news from Congress, Pelosi saying a deal could happen within hours.
PRICES @ 10:00 AM ET
10 yr. note: 0.85% +6 bp
5 yr. note: 0.47% +7 bp
2 Yr. note: 0.34% +2 bp
30 yr. bond: 1.43% +7 bp
Libor Rates: 1 mo. 0.946%; 3 mo. 0.1.215%; 5 mo. 0.973%; 1 yr. 0.937% (3/23/20)
30 yr. FNMA 3.0: @9:30 103.91 +47 bp (+77 bp from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 103.42 +26 bp (-9 bp from 9:30 yesterday)
30 yr. GNMA 3.0: @9:30 104.31 +19 bp (+26 bp from 9:30 yesterday)
Dollar/Yuan: $7.0581 -$0.0339
Dollar/Yen: 110.98 -0.26 yen
Dollar/Euro: $1.0819 +$0.0092
Dollar Index: 101.75 -0.74
Gold: $1659.00 +$91.50
Crude Oil: $23.65 +$0.23
DJIA: 19,825.35 +1235.32
NASDAQ: 7216.25 +355.28
S&P 500: 2362.47 +125.47
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.