March 26th, 2020 9:52 AM by Richard Sardella MLO.100007700/NMLS 233568
Markets have waited all week for the weekly unemployment claims; the forecasts and estimates were broad, from +700K to one forecast at 7 million. Claims increased by 3.283 million. The stock indexes at 8:25 am ET this morning were weak, the DJIA -515, the 10 yr. note at 0.78% -8 bps, and FNMA 3.0 coupon 104.52 +19 bps. At 8:45 am ET, the DJIA trading in the futures market -149, the 10 yr. – 8 bps and FNMA 3.0 coupon +11 bps from yesterday. FNMA 2.5 coupon dropped 25 bps from before the claims data. The filings data is a record for claims filed. For almost a year the weekly claims data had been so stable the report was hardly noticed. Interesting though that states were able to process so many claims. Next week’s claims will be just as large, if not more.
The $2 trillion in spending and tax breaks was passed by the US Senate late last night. $500B in loans and assistance for larger companies, as well as states and cities. Companies receiving a government loan would be subject to a ban on stock buybacks through the term of the loan plus one additional year. The Treasury Department would have to disclose the terms of loans or other aid, and a new Treasury inspector general would oversee the lending program. Struggling US airlines would be eligible to receive federal loans and direct cash assistance if they are willing to give an option for an ownership stake to the government. $25B to passenger carriers and $3B to airline contractors providing ground staff such as caterers, while cargo haulers would see $4B (money to airlines will be re-paid). The addition of direct cash relief -- earmarked specifically for payrolls -- was sought by airline and industry unions.
The legislation doesn’t include emissions limits for airplanes that were sought by House Democrats, Senator Pat Toomey, a Pennsylvania Republican, said on a press call. $350B in aid for small businesses, much of which would be in loans through the Small Business Administration and banks, guaranteed by the federal government. Direct payments to lower- and middle-income Americans of $1,200 for each adult, as well as $500 for each child. Low-income taxpayers to get the full $1,200 payment. The initial plan would have given smaller checks, or in some cases, no money at all, to very-low-income people. Borrowers with loans insured by government agencies such as the Federal Housing Administration and the Department of Veterans Affairs would be eligible for forbearance. Consumers whose mortgages are backed by Fannie Mae and Freddie Mac would also be eligible to skip payments. Mortgage servicers, couldn’t demand documentation proving economic hardship. Instead, borrowers would just have to attest that they’re struggling, according to the text of the legislation. A coronavirus relief fund with $150B would be created for states, cities, and other local governments. There is more in the bill, but those are the headlines.
This bill isn’t signed yet; it now has to pass the House. Congress will be adding more over the coming months.
Gold is finally making the headlines as the supply is being tested. Worldwide panic over the coronavirus outbreak and a flood of stimulus by central banks has ignited demand for one of the oldest methods of storing wealth. There are thousands of tons of gold bars sitting in vaults around the world, and it’s suddenly much harder to get metal when and where it’s needed. “Since last week, face masks, hand sanitizers, toilet rolls, and bullion have something new in common – they run out when everyone tries to buy them,” said Vincent Tie, sales manager at Silver Bullion Pte Ltd in Singapore.” The largest single depository is the New York Fed, which holds 497,000 1 kilo bars stacked high on the Manhattan bedrock. In London, the Bank of England in the City of London holds a further 400,000 bars, while other vaults are operated by banks and logistics companies. London and Switzerland are also huge depositories.
At 9:30 am ET, the DJIA opened +470, NADSAQ +108, S&P +48. 10 yr. 0.81% -5 bps (up from 0.78% at 8:30). MBS prices at 9:30 FNMA 3.0 -14 bps, 2.5 coupon -58 from yesterday’s closes. At 8:30 am ET, the 3.0 coupon was +11 bps, the 2.5 coupon +25 bps.
Powell this morning: The United States “may well be in recession,” but progress in controlling the spread of the coronavirus will dictate when the economy can fully reopen, Federal Reserve chair Jerome Powell said Thursday in an interview on NBC’s Today Show. “We are not experts in pandemic... We would tend to listen to the experts. Dr. Fauci said something like the virus is going to set the timetable, and that sounds right to me,” Powell said, in reference to Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases who is on the White House’s coronavirus task force. “The first order of business will be to get the spread of the virus under control and then resume economic activity.” His comments are a contrast to the urging by some of President Donald Trump’s advisers for a faster reopening.
PRICES @ 10:00 AM ET
10 yr. note: 0.81% -5 bp
5 yr. note: 0.50% -4 bp
2 Yr. note: 0.31% -3 bp
30 yr. bond: 1.40% -5 bp
Libor Rates: 1 mo. 0.959%; 3 mo. 1.267%; 6 mo. 1.067%; 1 yr. 0.987% (3/25/20)
30 yr. FNMA 3.0: @9:30 104.19 -14 bp (-65 bps from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 104.32 unch (-46 bps from 9:30 yesterday)
30 yr. GNMA 3.0: @9:30 104.75 -12 bp (-52 bps from 9:30 yesterday)
Dollar/Yuan: $7.0761 -$0.0383
Dollar/Yen: 109.66 -1.54 yen
Dollar/Euro: $1.0973 +$0.0089
Dollar Index: 100.16 -0.89
Gold: $1657.40 +$24.00
Crude Oil: $23.60 -$0.89
DJIA: 21,764.76 +564.21
NASDAQ: 7568.37 +184.08
S&P 500: 2539.50 +63.94
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.