May 9th, 2019 9:34 AM by Richard Sardella MLO.100007700/NMLS 233568
Trade issues continue to dominate the equity markets; this morning early the DJIA in futures markets was down 119 points. The bond market is improving this morning and the 10-yr note at 8:30 am ET was at 2.44%, dropping -4 bps. Yesterday selling in MBSs pushed priced 10 bps lower than on Tuesday, and in early activity, this morning was up 9 bps.
Weekly jobless claims were at 228K, down -2 on estimates of -15K. No issues with claims these days.
March PPI at 8:30 am ET was better than estimates. Overall it was up +0.2% on thoughts of +0.3%; yr/yr +2.2% with forecasts of 2.4%. The core (ex-food and energy) +01.%, lower than 0.2% expected; yr/yr +2.4% compared to estimates of 2.5%. The broader figure excluding food, energy, and trade services was higher at 0.4% on estimates of +0.2%, yr/yr +2.2%. PPI is showing little inflation at the wholesale level. There is a strong bounce-back in fees for portfolio management services, a factor related to the strength of financial markets which Jerome Powell cited at last week's FOMC that would likely help move the core PCE index from its annual 1.6 percent rate back toward 2 percent. Tomorrow CPI will be released. There is no noticeable reaction to the report.
Also at 8:30 am the March US trade deficit at -$50.0 as expected and up from -$49.3B in February.
At 9:30 am the DJIA opened down -200, the NASDAQ dropped -73, and the S&P was lower by -24. The 10-yr stood at 2.44%, down -4 bps from yesterday.
Most all focus is on US/China trade talks that re-start today in Washington. China is still trying to muscle the US but President Trump is not relenting, and unless progress is made today and tomorrow he will increase current tariffs from 10% to 25% and may add more later this month that will essentially put tariffs on all imports from China. China was sucked into the belief by Trump’s comments that the Fed should cut rates by 1.0%. Their take is that the US economy is softening, thus the US had a weaker hand than China had expected. That blew up Sunday with his tweets. China completely missed the message when it changed its tactics and decided to renege on what the US negotiators had believed was agreed on. China is changing its laws to back off government-sponsored businesses that the US says hurt US companies in China.
This afternoon the Treasury will sell $19B of 30s; yesterday’s 10-yr auction was extremely weak on demand — one of the weakest 10 yr auctions in at least two years, perhaps longer.
There has been no change in mortgage rates over the last two weeks while the 10-yr note yield has dropped 16 bps since mid-April. Money is moving to safety in treasuries, widening the spread between the 10 and 30 yr mortgage rates. Technicals remain neutral on MBSs, but it’s a little better for treasuries. That said, however, on a wider technical measurement the momentum oscillators have been in very narrow ranges not indicating increasing demand much. There are no big movements expected now until there are more details on the trade talks in Washington.
PRICES @ 10:00 AM
10 yr. note: +15/32 (47 bp) 2.43% -5 bp
5 yr. note: +10/32 (31 bp) 2.22% -6 bp
2 Yr. note: +3/32 (9 bp) 2.25% -5 bp
30 yr. bond: +24/32 (75 bp) 2.85% -4 bp
Libor Rates: 1 mo. 2.451%; 3 mo. 2.545%; 6 mo. 2.582%; 1 yr. 2.713% (5/8/19)
30 yr. FNMA 4.0: @9:30 102.69 +6 bp (-9 bp from 9:30 yesterday)
15 yr. FNMA 3.5: @9:30 102.40 +6 bp (-1 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 103.17 unch (+1 bp from 9:30 yesterday)
Dollar/Yuan: $6.8266 +$0.0437
Dollar/Yen: 109.64 -0.46 yen
Dollar/Euro: $1.1223 +$0.0031
Dollar Index: 97.57 -0.03
Gold: $1283.80 +$2.40
Crude Oil: $61.38 -$0.74
DJIA: 25,649.98 -317.35
NASDAQ: 7819.28 -124.04
S&P 500: 2844.04 -35.19
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.