October 14th, 2020 9:29 AM by Richard Sardella MLO.100007700/NMLS 233568
Early today, the 10 yr. note traded at 0.72% -1 bp, stock indexes slightly better but quiet. MBS prices +5 bps from yesterday’s close.
Weekly MBA mortgage apps for last week; the composite index -0.7%, purchases apps -2.0%, and refinance apps were down 0.3%.
At 8:30 am ET, Sept PPI expected +0.2%, core +0.2%; as released overall PPI doubled, +0.4%, the core +0.4%. Yr./yr. PPI expected +0.2% increased 0.4%. Yr./yr. core PPI was expected +0.8%, as reported +1.2%. Yr./yr. core and trade services increased by 0.7% compared to +0.3% in August. Even though double expectations, there was no reaction to the release; the 10 yr. and MBS prices the same as before 8:30 am.
This is the beginning of earnings season with banks reporting. Investors are looking to earnings season to provide a spark for equity markets amid the dwindling prospects for more US economic stimulus before next month’s election. Most investors are betting on increased earnings not until the second quarter next year. In the meantime, there is still a little optimism about another stimulus, although fading by the day.
At 9:30 am ET, the DJIA opened +27, NASDAQ +47, S&P +7. 10 yr. at 9:30 am 0.72% -2 bps. 2.0 FNMA 30 yr. coupon at 9:30 am +3 bps from yesterday and unchanged from 9:30 am yesterday; the 2.5 30 yr. coupon -3 bps points from yesterday and -12 bps from 9:30 am yesterday.
At 2:00 pm ET, the Treasury is scheduled to report the Sept budget. Estimates are for the deficit for the month at -$115B. Sept ends the 2020 fiscal year, so we should also get the annual deficit that we expect to be at or above $3 trillion for 2020. Spending by the world’s governments to fight the coronavirus and the global economic downturn will propel public debt to a record level, the International Monetary Fund said, adding that more will be needed to assure a full recovery. Governments have committed $11.7 trillion, or 12% of global output, as of Sept. 11, the IMF said in its semiannual Fiscal Monitor report. That will drive up budget deficits by 9% of the gross domestic product on average this year, with cumulative public debt approaching 100% of global GDP.
Technicals doing what we expected, the 10 yr. hit 0.80% intraday last Thursday, the target we expected. Since then, the 10 yr. held for a few days at 0.79% highs, now back in the month’s long trading range. Pushing interest rates higher is difficult with the Fed continuing to remind markets that they will keep rates low until at least 2023. That is a long way from here, and we don’t put much substance to it, but markets do, and that is what is important now.
PRICES @ 10:00 AM ET
10 yr. note: 0.726% -0.5 bp
5 yr. note: 0.30% unch
2 Yr. note: 0.14% unch
30 yr. bond: 1.508% -0.5 bp
Libor Rates: 1 mo. 0.148%; 3 mo. 0.180%; 6 mo. 0.254%; 1 yr. 0.345% (10/13/20)
30 yr. FNMA 2.0: @9:30 103.11 +3 bp (unch from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.41 -3 bp (-12 b p from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.09 unch (-11 b p from 9:30 yesterday)
Dollar/Yuan: $6.7184 -$0.0282
Dollar/Yen: 105.20 -0.27 yen
Dollar/Euro: $1.1765 +$0.0021
Dollar Index: 93.32 -0.21
Gold: $1912.10 +$17.50
Crude Oil: $41.06 +$0.86
DJIA: 28,781 +100
NASDAQ: 11,925 +61
S&P 500: 3526 +14
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.