May 14th, 2020 8:48 AM by Richard Sardella MLO.100007700/NMLS 233568
Last night the 10 yr note yield fell to 0.61%, down 4 bps from 5:00 pm ET yesterday. Early this morning, the 10 yr still traded at the low. At 8:30 am, ET, weekly jobless claims at 2.98 mil -195K from the previous week and for the 6th week lower than the previous week. According to Fed data, almost 40% of Americans in households making less than $40,000 a year had lost a job in March.
April import prices declined 2.6%, yr/yr -6.5%; export prices -3.3%, yr/yr -7.0% Import prices a little better than -3.0% forecasts, export prices were weaker than -2.3% estimates. The virus is keeping price gains from increasing as the world economies are slowing.
Yesterday Fed chief Powell sent a strong warning about the outlook that added more pressure on the stock indexes. Until the last few sessions, the stock market was on a buying binge that was excessive and too optimistic. Powell said his colleagues are staring down the possibility of mass bankruptcies and long-lasting unemployment unless there's a more concerted government effort to shield the U.S. economy from the impact of the coronavirus pandemic. Some investors are looking for insights into how hard Powell's resolve is against cutting the Fed's benchmark interest rate beneath zero, something he has warned against doing in the past. "The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems," Powell said. This morning Sec of Treasury Mnuchin attempting to soften Powell's outlook saying, "I think what the chair was saying is that there could be significant downside risk, but on the other hand" if the U.S. reopens its economy slowly and carefully, "next year we'll be back to having a great economy just like we had before."
Democrats are proposing another $3 trillion of stimulus; Republicans are unlikely to buy into the bill as offered by Dems. Mnuchin commenting on the bill that there's no urgency for additional spending. "Let's have this money in the economy, let's take the next 30 days and think carefully," Mnuchin said. "If we need to spend more money down the road, we'll come back and do that."
As we reported yesterday, two of the biggest names in the financial world, David Tepper and Stanley Druckenmiller, the latest to weigh in after a historic market rebound, saying the risk-reward of holding shares is the worst they've encountered in years. Tepper said that, next to 1999, equities are overvalued the most he's ever seen.
On the interest rate markets, bets have been increasing everywhere. Oil printing a negative price recently, in the face of that, suggests there's a feeling that global central banks and governments will stop at nothing to counter the deflationary forces. So far though the 10 yr note and MBS rates have been holding well in their respective ranges, still no noticeable reactions. This morning, once again, the 10 yr is pushing at its month's long lows. The 10 yr hit 0.60% last night and stopped, as it has done on any buying since early March.
At 9:30 am ET, the DJIA opened -196, NASDAQ -60, S&P -22. 10 yr at 9:30 am ET, 0.62% -2 bps. FNMA 3.0 30 yr coupon at 9:30 am ET, +6 bps from yesterday's close, and +13 bps from 9:30 yesterday.
The world is on edge about the re-openings of economies. No one is sure what the virus will do when more people are moving around. Looking back at the estimates that were talked about in real-time, most of the projections about the virus have not occurred (good or bad). The data changes daily, opinions are a dime a dozen, the best scientists differ while the economic outlook from all of the experts and economists have more forecasts that vary than the weather man's outlook. In short, for all of the ink and official comments and interviews, the outlook is unknown. The DJIA down 1432 points the last three sessions so far.
PRICES @ 10:00 AM ET
10 yr note: 0.61% -3 bp
5 yr note: 0.29% -2 bp
2 Yr note: 0.15% -1 bp
30 yr bond: 1.29% -6 bp
Libor Rates: 1 mo 0.183%; 3 mo 0.392%; 6 mo 0.675%; 1 yr 0.769% (5/13/20)
30 yr FNMA 3.0: @9:30 104.94 +6 bp (+13 bp frm 9:30 yesterday)
15 yr FNMA 3.0: @9:30 105.47 -2 bp (+8 bp frm 9:30 yesterday)
30 yr GNMA 3.0: @9:30 105.59 -28 bp (+13 bp frm 9:30 yesterday)
Dollar/Yuan: $7.1002 +$0.0078
Dollar/Yen: 106.91 -0.12 yen
Dollar/Euro: $1.0793 -$0.0025
Dollar Index: 100.40 +0.15
Gold: $1737.40 +$21.00
Crude Oil: $26.09 +$0.80
DJIA: 22,789.62 -458.35
NASDAQ: 8711.17 -152.00
S&P 500: 2768.09 -51.91
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.