May 16th, 2018 9:31 AM by Richard Sardella MLO.100007700/NMLS 233568
The dam broke yesterday and selling flooded the bond and mortgage markets. Once 3.00% was taken out, then the inter-day high at 3.04% was also penetrated when selling overtook the market. Until yesterday trading in the 10-yr note rate had been essentially well balanced between 2.92% and 3.00%; investors betting on 3.00% would hold had to abandon and turned to selling those long positions. It wasn’t if the 10-yr would increase, but when — and it came with no warning.
This morning has been quiet and fractionally better; at 8:30 am EST the 10-yr was down 1 bp to 3.06% and MBS prices +6 bps from yesterday’s close.
Weekly MBA mortgage applications declined again; down 2.7% overall, down 2.0% on purchase apps and -4.0% on re-finances. The unadjusted year-on-year gain rose 1 percentage point from the prior week to 4 percent. Refinancing fell 4 percent from the previous week to the lowest level since August 2008, taking the refinance share of mortgage activity down 0.4 percentage points to 35.9 percent.
At 8:30 am April housing starts and permits numbers were released; starts were thought to be 1324K from 1319K in March, +0.4% as reported +1287K; however March starts were revised from 1319K to 1336K, causing the percent change to -3.7% from the revision. Starts were weaker than forecasts. Permits were thought to be 1350K, as reported 1352K, but March was revised from 1354K to 1377K, -1.2% from the revised level.
At 9:15 am April industrial production and capacity utilization figures revealed production expected +0.6%, cap utilization 78.4%. Production +0.7%, cap utilization at 78%.
What appeared as a step forward between North and South Korea and the US last week is looking wobbly; the North announced it won’t meet with the South because of the annual military exercises between the US and South Korea.
US financial markets (stocks and bonds) are quiet so far this morning after yesterday’s volatile movements in both. After moving above 3.00% yesterday, that 3.00% now becomes a resistance point. Inflation concerns have been boosted recently. The Fed is universally expected to increase the Federal Fund rate next month, crude oil adding to inflation worries. Stocks are adjusting to higher rates. Obviously nothing has changed in our outlook, still bearish. 3.00% on the 10-yr is critical from a technical perspective.
PRICES @ 10:00 AM
10 yr. note: +2/32 (6 bp) 3.07% unch
5 yr. note: +1/32 (3 bp) 2.91% -1 bp
2 Yr. note: +1/32 (3 bp) 2.58% unch
30 yr. bond: +7/32 (22 bp) 3.19% unch
Libor Rates: 1 mo. 1.938%; 3 mo. 2.320%; 6 mo. 2.492%; 1 yr. 2.753% (5/15/18)
30 yr. FNMA 4.0 June: @9:30 101.20 +6 bp (-3 bp from 9:30 yesterday)
15 yr. FNMA 4.0: @9:30 102.38 +2 bp (-3 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 101.92 +3 bp (-2 bp from 9:30 yesterday)
Dollar/Yen: 110.17 -0.18 yen
Dollar/Euro: $1.1798 -$0.0039
Dollar Index: 93.42 +0.14
Gold: $1290.40 +$0.10
Crude Oil: $70.87 -$0.44
DJIA: 24,736.88 +30.47
NASDAQ: 7380.16 +28.54
S&P 500: 2717.67 +6.22
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.