September 13th, 2018 8:56 AM by Richard Sardella MLO.100007700/NMLS 233568
The 10-yr hit 2.98% yesterday and MBS prices were off -22 bps from Monday. This morning some improvement is driven by a surprising decline in the August PPI data. The 10-yr at 2.96% dropped -2 bps and MBS prices added +6 bps by 9:00 am EST.
August PPI, expected to be up +0.2% m/m, declined 0.1%m/m; yr/yr +2.8% down from 3.3% in July. The core (excluding food and energy) expected to add +0.2% also declined 0.1%; yr/yr 2.3%, down from 2.7% in July. The first decline in PPI read in 18 months and at least for the moment relaxes the inflation fears. PPI less food, energy, and trade services were up +0.1% from +0.3% in July, but yr/yr 2.9% was up from 2.8% in July. Services obviously increased. Wholesale prices are important, but tomorrow the more critical August CPI will be reported. The dip in PPI isn’t going to change the Fed’s plans to increase the Federal Funds rate later this month nor the increasing idea of another increase in Dec. If CPI is also less than thought, it may stir up the idea of no increase in December.
Weekly MBA mortgage applications declined 1.8%; purchases +1.0%, re-finances -6.0%. The purchase index is 4% above the level a year ago. Refinances are the lowest since December 2000; the percentage of re-fi apps at 37.8% is down 1.8% from last week’s apps. Two years ago refinances accounted for more than 60% of all apps. The week's results include adjustments for the Labor Day holiday.
At 1:00 pm the Treasury will auction $23B of 10-yr notes, re-opening the issue in the August refunding. Yesterday the 3-yr auction was weak on demand.
Hurricane Florence is scheduled to hit the coasts of North and South Carolina Friday. Forecasters are predicting it will slow as it hits land but dump as much as 40 inches of rain this weekend and early next week. Most don’t believe it will have any major long-lasting damage to the economy but as with Harvey last year it is going to distort a lot of economic data over the next two months. Look for weekly jobless claims to increase and declines in retail sales (except Home Depot and Lowes and other home improvement companies). Traders and investors will discount much of the anticipated slowing as temporary. The wider outlook from the storm will likely add to growth as the costs of repairs to infrastructure boost spending. Boeing flew at least eight 787 aircraft out of a South Carolina factory to Seattle yesterday as Hurricane Florence advanced on the region. The operation included two 787-9s destined for Hainan Airlines and a 787-10 for United Continental.
At 2:00 pm the Fed will release its Beige Book which details all of the 12 Fed districts’ It’s usually pretty interesting, with specifics not otherwise revealed in various other monthly national data points.
PRICES @ 10:00 AM
10 yr. note: +5/32 (15 bp) 2.96% -2 bp
5 yr. note: +2/32 (6 bp) 2.85% -1 bp
2 Yr. note: unch 2.74% unch
30 yr. bond: +11/32 (34 bp) 3.10% -2 bp
Libor Rates: 1 mo. 2.147%; 3 mo. 2.334%; 6 mo. 2.557%; 1 yr. 2.868% (9/11/18)
30 yr. FNMA 4.0 Oct: @9:30 101.27 +8 bp (-3 bp from 9:30 yesterday)
15 yr. FNMA 4.0: @9:30 102.18 +1 bp (+4 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 102.08 +11 bp (+6 bp from 9:30 yesterday)
Dollar/Yuan: $6.8683 -$0.0042
Dollar/Yen: 111.30 -0.32 yen
Dollar/Euro: $1.1598 -$0.0009
Dollar Index: 95.11 unch
Gold: $1200.70 -$1.50
Crude Oil: $70.23 +$0.98
DJIA: 26,024.25 +53.19
NASDAQ: 7937.56 -34.92
S&P 500: 2888.98 +1.71
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.