May 18th, 2020 9:18 AM by Richard Sardella MLO.100007700/NMLS 233568
This week there's not a lot of key data about the economy, but housing data with NAHB April starts and permits, and April's existing home sales are of interest. Jerome Powel will be speaking twice this week. Last week he sent a cautious remark that the economic rebound won't be easy.
Increasing hope over the weekend that a vaccine for the virus is moving along more quickly than expected, supporting the advance in the stock indexes this morning. An experimental vaccine from Moderna Inc. showed promising early signs that it can create an immune-system response in the body that could help fend off the new coronavirus—conducting small human trials. Primarily designed to look at the safety of the shot and showed no major warning signs in a small phase 1 trial, the company said in a statement earlier this morning. "This is a very good sign that we make an antibody that can stop the virus from replicating," Moderna Chief Executive Officer Stephane Bancel said in an interview. The data "couldn't have been better," he said.
Pelosi pushed ahead with a vote on a $3 trillion Democratic-only virus relief bill Friday despite the misgivings of some liberals and moderates in her party. As presented, there is no chance it will make it in the Senate. There will likely be more stimulus, but how much and how it will help will lead to weeks of debate and wrangling between the House and Senate. Senate leader Mitch McConnell said Congress should wait and see the impact of $3 trillion in stimulus already passed before acting on another package. Although last Thursday night on Fox News, he said that "there is a high likelihood that there will be another bill." Meantime last week, Powell essentially said the Fed has an open checkbook ready and waiting. Fed Chairman appeared on 60 Minutes last evening, reiterating his view that the Fed is not out of ammunition "by a long shot" and that there is no limit to the Fed's lending programs. The Fed is already buying up debt at a record level, buying debt the Fed has never done before this, low-grade corporates. Unemployment checks are flowing, $490 billion has been shipped to small businesses, and the US Federal Reserve has put about $2.5 trillion and counting behind domestic and global markets.
At 9:30 am ET, opened +678, NASDAQ +152, S&P +69. 10 yr. 0.67% +3 bps. FNMA 3.0 30 yr. coupon at 9:30 am -5 bps from Friday’s close and -26 bps from 9:30 am Friday.
Through this week, the key for MBSs is as always, the 10 yr. note. As you are aware, the 10 yr. hasn't changed much for the last six weeks; trading in a very narrow range with strong technical resistance at 0.60%. Normally, the week leading to Memorial day, trading thins out by mid-week, this week may be different given the present circumstances. Regardless of the stock market movement, the long-dated treasuries are concerned about the massive increase in US debt and still have underlying fears of future economic weakness that runs contrary to equity market thinking.
At 10:00 am ET, the May NHAB housing market index was expected at 33, as reported 37.
PRICES @ 10:00 AM ET
10 yr. note: 0.68% +4 bp
5 yr. note: 0.33% +2 bp
2 Yr. note: 0.17% +2 bp
30 yr. bond: 1.38% +5 bp
Libor Rates: 1 mo. 0.172%; 3 mo. 0.380%; 6 mo. 0.659%; 1 yr. 0.755% (5/15/20)
30 yr. FNMA 3.0: @9:30 104.80 -3 bp (-26 bp from 9:30 Friday)
15 yr. FNMA 3.0: @9:30 105.34 -1 bp (-18 bp from 9:30 Friday)
30 yr. GNMA 3.0: @9:30 105.30 -47 bp (-33 bp from 9:30 Friday)
Dollar/Yuan: $7.1089 +$0.0068
Dollar/Yen: 107.36 +0.30 yen
Dollar/Euro: $1.0864 +$0.0046
Dollar Index: 100.02 -0.38
Gold: $1749.10 -$8.10
Crude Oil: $32.78 +$3.35
DJIA: 24,422.66 +737.24
NASDAQ: 9173.74 +159.18
S&P 500: 2936.14 +72.44
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.