October 10th, 2018 9:12 AM by Richard Sardella MLO.100007700/NMLS 233568
Sept PPI up 0.2% overall and +0.2% for the core, both as expected. Yr/yr overall PPI +2.6% down from 2.8% in August; the core yr/yr +2.5% up from 2.3% in August. The core PPI plus trade services expected +0.2% increased to +0.4%, yr/yr 2.9% unchanged from August. There was little noticeable reaction to the report but does imply some increases at the wholesale level. In August the overall PPI was -0.1% and the core was -0.1%. Tomorrow the Sept CPI will provide a more important look at inflation.
Weekly MBA mortgage apps were down 1.7% from the prior week; purchase apps -1.0% and refinances down 3.0%. The year-on-year unadjusted gain down 1 percentage point to 2.0%. The share of refinances continues to decline, at 39.0% down 0.4% from last week.
More from the IMF this morning; yesterday the lender lowered its outlook for growth, today warning that markets may be ignoring the possibility that financial conditions might tighten. “Asset valuations appear to be relatively high in some markets, notably in the United States,”….. “Overall, market participants appear complacent about the risk of a sharp tightening of financial conditions.” The IMF noted US stock valuations have increased “beyond” before the financial crisis in 2008. Our take has been stocks are overvalued but also that investors seem to not care much as the indexes have moved higher and higher. Stocks increasing while interest rates are increasing is an anomaly. Until recently the VIX volatility index has been low, but yesterday the index was at 16 above this year’s average. On emerging markets, the IMF categorizes the risk as “moderate,” but their debt is increasing.
At 9:30 the DJIA opened -69, NASDAQ -44, S&P -11. 10 yr note 3.23% +2.5 bp from yesterday. MBS prices at 9:30 -11 bps from yesterday’s close but +14 from 9:30 yesterday.
At 10:00 am August wholesale inventories were expected +0.8%, as reported +1.0%, the highest increase since Oct 2013.
At 11:30 am Treasury will auction $36 of 3 yr notes.
At 1:00 pm Treasury will auction $23B of 10s, it will be closely monitored for demand after the recent increase in the rate. Increased or strong demand will likely add a little support for the rate, a weak demand conversely will fuel the view that the rate will continue to increase.
Still absorbing the recent increase in rates, the 10 yr has held the increases in the last three sessions, no sustained improvements. Yesterday a nice improvement but meaningless concerning any change in the negative outlook. Not expecting any appreciable selling or buying until at least 1:00 pm when the results of the 10 yr auction are reported. Some remarks on CNBC pointing to the increase in PPI data as the reason for the increase in yields today; that is a little misleading, the 10 yr note traded at 3.23% prior to the 8:30 report and hasn’t moved since then; actually the 10 yield has slipped 1 bp to 3.22% since 8:30. Stock indexes under pressure this morning on the IMF comments (see above).
PRICES @ 10:00 AM
10 yr. note: -4/32 (12 bp) 3.22% +2 bp
5 yr. note: -1/32 (3 bp) 3.06% +0.5 bp
2 Yr. note: unch 2.88% unch
30 yr. bond: +5/32 (15 bp) 3.38% +1 bp
Libor Rates: 1 mo. 2.287%; 3 mo. 2.420%; 6 mo. 2.629%; 1 yr. 2.962% (10/9/18)
30 yr. FNMA 4.5: @9:30 102.28 -11 bp (+14 bp from 9:30 yesterday)
15 yr. FNMA 4.0: @9:30 101.65 +1 bp (+3 bp from 9:30 yesterday)
30 yr. GNMA 4.5: @9:30 102.69 -2 bp (+9 bp from 9:30 yesterday)
Dollar/Yuan: $6.9255 +$0.0027
Dollar/Yen: 112.90 -0.05 yen
Dollar/Euro: $1.1526 +$0.0034
Dollar Index: 95.59 -0.09
Gold: $1191.60 +$0.10
Crude Oil: $74.35 -$0.63
DJIA: 26,212.69 -217.88
NASDAQ: 7602.29 -135.72
S&P 500: 2851.49 -28.85
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.