May 10th, 2019 1:13 PM by Richard Sardella MLO.100007700/NMLS 233568
Overnight and early this morning the rate markets were unchanged from yesterday. Not much change this week with the focus on US/China trade negotiations.
At 8:30 am ET the April CPI was expected to be up +0.4%, better at 0.3%, yr/yr +2.0% on forecasts of 2.1%. The core expected +0.2%. As reported it was +0.1%, yr/yr 2.1% as expected. Housing and medical care, which together make up about half the CPI, both rose 0.3 percent in the month with respective yearly rates at 2.9 percent for housing and only 1.9 percent for medical care. On housing, rents continue to lead with a 0.4 percent monthly gain and the yearly at 3.8 percent. For homeowners, the equivalent measure rose 0.3 percent and 3.4 percent for the annual. For medical care, physician services rose 0.2 percent in April though the yearly rate remains at only 0.3 percent. Hospital services fell a monthly 0.5 percent with this year-on-year increase at 1.2 percent.
At 12:01 am tariffs against China were increased to 25% from 10% on $200B of US imports. U.S. Customs and Border Protection imposed a 25% duty on more than 5,700 categories of products leaving China after 12:01 a.m. EDT. Negotiators are in Washington, but so far nothing has changed this. President Trump is saying this morning he is no hurry to get a deal after yesterday’s more optimistic comments. It wasn’t likely any significant deal would be reached this week. Stock markets are falling, and interest rates are holding low levels, but there are no significant changes this week unless it occurs through the day today. China will retaliate as expected but hasn’t yet made an announcement. Without elaborating, China’s Commerce Ministry said it would take countermeasures. The added levy could reduce U.S. gross domestic product (GDP) by 0.3% and China’s by 0.8% in 2020, consultancy Oxford Economics said.
In Friday morning tweets, the president defended his decision to raise tariffs, saying there was no need to rush into a deal and added that the American economy would be boosted more by the levies than by an eventual deal. Tariffs that went into effect at midnight will likely hit Americans in the pocketbook, making $40B of consumer goods on retailers’ shelves more expensive. “We remain concerned that we’re shooting ourselves in the foot by imposing big new taxes on Americans,” said David French, senior vice president of government relations for the National Retail Federation. “To be clear, tariffs are taxes paid by businesses and consumers, not by China.”…. “I’m different than a lot of people,” Mr. Trump said at the White House. “I happen to think the tariffs for our country are very powerful.” More tariffs may be coming later this month that if implemented would put tariffs on all Chinese exports to the US.
At 9:30 am the DJIA opened down -76, the NASDAQ dropped -29, and the S&P was lower by -9. The 10-yr remained unchanged at 2.46%.
As far as interest rates are concerned there have been no changes in the bond and mortgage markets this week. The bond markets globally are taking all of the trade talks with aplomb, concerned more about the potential of increased inflation if the trade ends up to be a prolonged war.
Our near-term technical models remain neutral, neither bullish nor bearish. The 10 hasn’t moved this week, and the last two sessions have been in extremely tight ranges. We continue to note investors’ pricing does deviate from actual levels when pricing to originators.
PRICES @ 10:00 AM
10 yr. note: -2/32 (6 bp) 2.45% unch
5 yr. note: unch 2.24%
2 Yr. note: +1/32 (3 bp) 2.25% -0.5 bp
30 yr. bond: +8/32 (25 bp) 2.87% -1 bp
Libor Rates: 1 mo. 2.453%; 3 mo. 2.535%; 6 mo. 3.581%; 1 yr. 2.702% (5/9/19)
30 yr. FNMA 4.0: @9:30 102.67 unch (unch from 9:30 yesterday)
15 yr. FNMA 3.5: @9:30 102.32 -3 bp (-9 bp from 9:03 yesterday)
30 yr. GNMA 4.0: @9:30 103.14 unch (unch from 9:30 yesterday)
Dollar/Yuan: $6.8243 -$0.0032
Dollar/Yen: 109.71 -0.06 yen
Dollar/Euro: $1.1243 +$0.0028
Dollar Index: 97.21 -0.21
Gold: $1287.20 +$1.90
Crude Oil: $61.78 +$0.08
DJIA: 25,699.53 -135.23
NASDAQ: 7874.46 -31.13
S&P 500: 2858.05 -12.76
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.