May 11th, 2018 8:59 AM by Richard Sardella MLO.100007700/NMLS 233568
Treasuries and mortgages opened better this morning and like most of the time over last few weeks didn’t move much from morning opening levels. The 10 yr. at 2.97% is where it was at 8:00 am ET and MBS prices +16 bps just three clicks lower than at 9:30 when investors set mortgage pricing.
April CPI was softer than thought adding to support in the bond and mortgage markets (+0.2% overall and the core +0.1% against 0.2% forecasts; yr./yr. overall CPI +2.5% and the core yr./yr. +2.1%). As noted this morning, both over that 2.0% that has hung over the Fed and ECB for almost three years now; however it’s the PCE personal consumption expenditures that the Fed watches. The next time we will see that is on May 31st when April personal income and spending data will be released.
The Bank of England left its base rate unchanged at 0.5%; comments from the BOE were concerned about the slowing Brit economic outlook related to Brexit.
This afternoon Treasury sold $17B of 30s, an OK auction as was the 10 yr. yesterday. It was the largest 30 yr. auction Treasury has ever issued, the 30 was halted in 2000 re-starting the 30 yr. auctions in 2006.
The April Treasury budget much better than estimates at +$88B the surplus was +$214.3B. Unusual forecast compared to reality being that far apart. Over the seven months into fiscal 2018, the total deficit is $385.4B and brings into question our forecast of $1 trillion this year. Year-to-date receipts so far this fiscal year are up 4.1 percent to $2.007 trillion with individual taxes up 11.2 percent and corporate taxes down 24.5 percent. Year-to-date outlays, at $2.393 trillion, are up 5.3 percent led by net interest which is up 16.3 percent and also defense at a 4.7 percent gain. Tax receipts so far in calendar 2018 vs. the first four months of 2017 show an 11.5 percent increase in individual taxes to $695.8B and a 30.3 percent decline in corporate taxes to $58.7B.
Tomorrow April import and export prices (import prices +0.5%, export prices +0.3%). Also tomorrow at 10:00 the U. of Michigan consumer sentiment index for mid-month expected at 99.0 from 98.8 on the final April reading.
Nationwide, the price of a gallon of regular gasoline hit $2.96 this week, according to the Energy Information Administration. That's up from $2.49 a gallon a year ago, a gain of 19 percent; over $3.00 in the western US; #3.39 in Seattle, $3.71 in SF, $3.65 in LA.
Pres. Trump announced the North Korea/US summit for June 12th in Singapore. “We will both try to make it a very special moment for World Peace!” Mr. Trump wrote on Twitter in revealing the time and date of the summit.
Early this morning the 10 yr. dropped briefly to 2.94% but if you blinked you missed it; most of the session at 2.97%. Possibly more slight improvements tomorrow, but even if there is it won’t change the bearish outlook. 2.90% has to be penetrated and close below it to set off a longer-term movement. The recent situation has kept rates very stable, moving in a few basis point range; technically it is difficult to take any real advantage of the bond market; the 10 can trade in a 10 bp range from highs to lows and not change the negative bias. Coupon rollover tomorrow; MBS price drop from May to June 20 bps.
PRICES @ 4:00 PM
10 yr. note: +7/32 (22 bp) 2.966% -3.5 bp
5 yr. note: +2/32 (6 bp) 2.83% -2 bp
2 Yr. note: unch 2.53% unch
30 yr. bond: +30/32 (94 bp) 3.11% -3 bp
Libor Rates: 1 mo. 1.928%; 3 mo. 2.355%; 6 mo. 2.518%; 1 yr. 2.770% (5/9/18)
30 yr. FNMA 4.0 May: 101.77 +19 bp (unch from 9:30)
15 yr. FNMA 4.0: 102.60 +12 bp (unch from 9:30)
30 yr. GNMA 4.0: 102.23 +5 bp (+5 bp from 9:30)
Dollar/Yen: 109.38 -0.37 yen
Dollar/Euro: $1.1927 +$0.0075
Dollar Index: 92.64 -0.48
Gold: $1321.50 +$8.50
Crude Oil: $71.45 +$0.31
DJIA: 24,739.53 +196.99 (252 high)
NASDAQ: 7404.97 +65.07
S&P 500: 2723.07 +25.28
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.