October 16th, 2020 9:04 AM by Richard Sardella MLO.100007700/NMLS 233568
Before 8:30 am ET this morning, MBS prices were up slightly (+5 bp), the 10 yr. 0.72% -2 bps. Stock indexes about unchanged.
At 8:30 am ET, another blockbuster economic report, with September retail sales. Sales were expected to have increased by 0.7%; sales exploded up 1.9%. Excluding auto sales, the forecasts were +0.3%, as released +1.5%. The control group increased by 1.5% on expectations of +0.2%. This report, so off the mark in terms of forecasts, begs the question of its accuracy. When you see that kind of disparity between forecasts and the report, something is missing. That said, when the media reports it, it will be all roses. The immediate reaction increased the 10 yr. yield bps to 0.75% +1 bp; MBSs – 3 bps from yesterday's close and -8 bps prior to 8:30 am ET.
At 9:15 am ET, Sept industrial production, expected +0.6%, unlike the unexpected strength in retail sales, production, as released, declined 0.6%; manufacturing output thought to be +0.8% declined 0.3%. Sept capacity utilization also weak compared to forecasts, 71.5% on expectations of 71.9%.
At 9:30 am ET, the DJIA opened +168, NASDAQ +46, S&P +14. 10 yr. 0.74% unchanged. FNMA 2.0 30 yr. coupon at 9:30 am +2 bps from yesterday's close and -5 bps from 9:30 yesterday; the 2.5 coupon at 9:30 am +3 bps from the close and unchanged from 9:30 yesterday.
At 10:00 am ET, the mid-month October U. of Michigan consumer sentiment index; the forecasts at 80.5 from 80.4 in Sept; as released another bullish release, the index increased to 81.2 and the highest since the pandemic began.
Technicals still lead the way in the short term. The 10 yr. note continues to find resistance at its 40-day average. It has not traded below it since August 10th and has tested it on 9 occasions since then. Recently after increasing to 0.80%, then declining, the yield fell to the 40-day at 0.70%, and so far, it held. The 9-day RSI is neutral after showing overbought conditions when the 10 yr. ran down to 0.70% from 0.80%. MBS technicals are neutral, neither bullish nor bearish. The demand for MBSs is strong, a better rate, and not too much risk at the low-interest rates.
PRICES @ 10:00 AM ET
10 yr. note: 0.73% -1 bp
5 yr. note: 0.31% unch
2 Yr. note: 0.14% +1 bp
30 yr. bond: 1.51% unch
Libor Rates: 1 mo. 0.147%; 3 mo. 0.217%; 6 mo. 0.253%; 1 yr. 0.347% (10/15/20)
30 yr. FNMA 2.0: @9:30 103.17 +2 bp (-5 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.55 +3 bp (+7 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.27 +6 bp +8 bp from 9:30 yesterday)
Dollar/Yuan: $6.6964 -$0.0290
Dollar/Yen: 105.34 -0.11 yen
Dollar/Euro: $1.1728 +$0.0020
Dollar Index: 93.64 -0.21
Gold: $1911.10 +2.40
Crude Oil: $40.15 -$0.81
DJIA: 28,7731 +237
NASDAQ: 11,800 +86
S&P 500: 3505 +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.