September 11th, 2020 10:03 AM by Richard Sardella MLO.100007700/NMLS 233568
Early this morning, stock indexes were trading better, the 10 yr. note and MBSs were both unchanged at 9:00 am ET.
At 8:30 am ET, August CPI; +0.4% on estimates of 0.3%; yr./yr. CPI expected +1.2% increased 1.3%. The core (ex-food and energy) was expected at +0.2% increased 0.4%, yr./yr. +1.7% on forecasts of +1.6%. Like yesterday’s August PPI, CPI slightly firmer, implying inflation edged higher in August, although minor. In August, consumer prices rose for a third month, driven by the sharpest gain in used-vehicles since 1969 and consistent with a gradual pickup in inflation as the economy recovers from the pandemic. Core CPI, +0.4% after +0.6% in July. Used cars +5.4% accounts for 40% of CPI. Inflation based on CPI and PPI is slowly increasing but with the Fed on record not worrying about any minor inflation concerns now. Powell is saying the Fed would tolerate inflation exceeding its former 2.% inflation target. The economy is not even close to 2.0% price increases. But inflation is increasing.
This afternoon at 2:00 pm ET, Treasury will report its August deficit expected at -$315B from -$63B in July; the increasing debt, while a concern, isn’t bothering investors yet. This year the annual debt will exceed $3 trillion. I am still concerned over the increasing Treasury debt and how it will be paid, but as long as interest rates are this low, it won’t cause near term concerns. If (when) interest rates begin to increase, we expect there will be more concerns. Concerns that the country can’t afford much more spending have been voiced by officials from both political parties in recent weeks, as stimulus efforts ground to a halt. The CBO predicts a deficit of about $3.7 trillion this year, or 16% of GDP.
At 9:30 am ET, the DJIA opened +146, NASDAQ +101, S&P +23. 10 yr. 0.68% unchanged from yesterday. FNMA 2.5 30 yr. coupon at 9:30 am +2 bps from yesterday’s close and -12 bps from 9:30 am; the 2.0 FNMA coupon -2 bps from 9:30 am yesterday.
Odds of another round of fiscal stimulus for the U.S. economy dropped on Thursday as senators headed out of Washington for the weekend following a partisan split over a slimmed-down package proposed by Republicans. Several GOP senators offered pessimistic comments after yesterday’s vote about the likelihood of a revival in talks before the election.
Not likely there will be any movement in the bond and mortgage markets today.
PRICES @ 10:00 AM ET
10 yr. note: 0.68% unch
5 yr. note: 0.26% -1 bp
2 Yr. note: 0.13% -1 bp
30 yr. bond: 1.42% unch
Libor Rates: 1 mo. 0.151%; 3 mo. 0.249%; 6 mo. 0.284%; 1 yr. 0.414% (9/10/20)
30 yr. FNMA 2.5: @9:30 105.03 +2 bp (-12 bp from 9:30 yesterday) 2.0 103.11 +5 bp (-2 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.73 +2 bp (+14 bp from 9:30 yesterday)
Dollar/Yuan: $6.8323 -$0.0021
Dollar/Yen: 106.11 -0.03 yen
Dollar/Euro: $1.1842 +$0.0026
Dollar Index: 93.20 -0.14
Gold: $1962.50 -$1.80
Crude Oil: $37.17 -$0.13
DJIA: 27,592 +58
NASDAQ: 10,907 -12
S&P 500: 3343 +4
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.