October 2nd, 2018 9:01 AM by Richard Sardella MLO.100007700/NMLS 233568
It was a little better start this morning in the bond and mortgage markets, erasing yesterday’s very minor increase; the 10-yr yesterday increased 2 bps to 3.08%, but by 9:00 am EST it was back to 3.06%. The DJIA jumped 192.90 on the news the US and Canada agreed on a trade deal that concludes the revamp of the old NAFTA deal with the US, Mexico, and Canada; this morning the index was trading lower in pre-open activity.
There are no data points today; the day is likely to be quiet as we move closer to the employment report on Friday; tomorrow starts the speculation in earnest when ADP reports its private jobs for September, expected to be about 179K.
There isn’t any significant market-moving news today. Amazon increased its minimum wage to $15.00 beginning in November. Amazon was under increasing pressure regarding wage disparity; lawsuits recently addressed how the company was using contract employees to get around regulations.
Europe’s markets were weaker this morning on renewed concerns over Italy’s fiscal plans. There is a growing likelihood that the European Commission will try to force the Italian government to lower its deficit target. However, Deputy Prime Minister Luigi Di Maio said the government will "not retreat even a millimeter" from its plan for a 2019 deficit of 2.4%, increasing the likelihood that the European Commission will try to force the Italian government to lower its deficit target. However, Di Maio said the government will "not retreat even a millimeter" from its plan for a 2019 deficit of 2.4%. The dollar is strengthening again this morning.
Boston Fed’s Eric Rosengren expressed concern yesterday that the labor market may become so tight that it will lead to inflationary pressures, defending the Fed’s plans to increase rates in December and next year. He admitted wage inflation so far has been tame, but he would like the level of employment to move higher to mitigate a fear that wage gains will set off an unexpected rapid increase in inflation. This is a key reason the Fed wants to get ahead of the curve with its increases. The Fed’s most recent projections show the unemployment rate has been hovering between 3.5 and 3.7 percent for more than 3 years, nearly a full percentage point below what Fed officials regard as sustainable in the long run without a run-up in wages and prices. “While inflation remains well contained to date, pushing the economy too hard risks inflationary concerns or financial-stability risks,” says Rosengren. “Either of these outcomes might necessitate a more forceful monetary policy response.” That was yesterday; today Amazon did move the bar higher for 250K employees.
Europe’s inflation is increasing; Eurozone August PPI added +0.3% month-over-month (expected 0.2%; last 0.7%); +4.2% year-over-year (expected 3.9%; last 4.3%).
At 9:30 am the DJIA opened weaker but well off the pre-open trading, down -14. The NASDAQ lost -5, SP -1, and the 10-yr stood at 3.06%, down -2 bp. MBS prices added +8 bps from yesterday’s close and +6 bps from the same time yesterday.
At 12:00 pm Jerome Powell is scheduled to speak at the 60th Annual National Association for Business Economics Annual Meeting in Boston.
Today should be quiet in the rate markets as the 10-yr is still consolidating the recent increase in its rate. We are not looking for rates to increases or prices to decline, but also don’t expect any major increases in prices or declines in yields. It was a better open this morning for MBSs and the 10-yr, but with employment on Friday and renewed inflation comments from Rosengren as well as Fed chair Powell at 12:00 pm, any major moves should be mitigated.
PRICES @ 10:00 AM
10 yr. note: +7/32 (22 bp) 3.056% -2.3 bp
5 yr. note: +3/32 (9 bp) 2.94% -2 bp
2 Yr. note: +1/32 (3 bp) 2.81% -1 bp
30 yr. bond: +19/32 (59 bp) 3.20% -4 bp
Libor Rates: 1 mo. 2.265%; 3 mo. 2.398%; 6 mo. 2.606%; 1 yr. 2.925% (10/1/18)
30 yr. FNMA 4.0: @9:30 100.98 +8 bp (+6 bp from 9:30 yesterday)
15 yr. FNMA 4.0: @9:30 101.95 -1 bp (-9 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 101.66 +8 bp (unch from 9:30 yesterday)
Dollar/Yuan: $6.8689 unch
Dollar/Yen: 113.72 -0.21 yen
Dollar/Euro: $1.1544 -$0.0033
Dollar Index: 95.56 +0.26
Gold: $1207.60 +$15.90
Crude Oil: $75.36 +$0.06
DJIA: 26,667.04 +15.83
NASDAQ: 8027.48 -9.82
S&P 500: 2923.09 -1.50
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.