September 14th, 2018 9:21 AM by Richard Sardella MLO.100007700/NMLS 233568
At 9:00 am EST the 10 yr at 3.00%; MBS prices dropped -9 bps from yesterday.
8:30 data; August retail sales, expected +0.4%, as released +0.1%; excluding auto sales, expected +0.5%, as released +0.3%. August was soft and confirmed other releases that consumers pulled back. Not quite as bad though; July sales originally reported +0.5% revised to +0.7%; excluding autos originally reported +0.6% revised to +0.9%. The August control group expected +0.4% but increased just 0.1%. Weakness in August is tied to motor vehicles where sales fell 0.8% following 0.1% declines in the prior two months in what is a very poor run for the auto industry. Non-store retailers are up 0.7% as e-commerce continues to muscle out gains. Yr/yr total retail sales rose 6.6% in August, little changed from July's 6.7%. And leading the sector are non-store retailers at 10.4%. Overall retail still doing well when viewed from a wider perspective.
More at 8:30 am; August import prices were expected to have declined 0.1%, as released import prices dropped 0.6% (July revised from 0.0% to -0.1%). Yr/yr import prices dropped to +3.7% in August from +4.8% in July. Export prices were forecast +0.2%, as released -0.1%. Yr/yr exports +3.6% but down from July’s 4.3%.
At 9:15 am August industrial production, expected +0.4%, reported +0.4%; July revised to +0.4% from +0.1% originally reported. Manufacturing, expected +0.3%, was +0.2%. Capacity utilization, thought to be at 78.3%, at 78.1%, and July revised from +78.1 to 77.9%.
At 10:00 am the mid-month University of Michigan consumer sentiment index was expected at 97 from July final 96.2. The index jumped to 100.8, the best since March and the second strongest read this year.
Also at 10:00 am July business inventories were estimated +0.5%; as released +0.6%.
Hurricane Florence at 9:00 am is slowly moving southwestward just off the coast of southeastern North Carolina, near the border with South Carolina. Top sustained winds have dropped to 85 mph. More than 415,000 homes and businesses were without power, mostly in North Carolina, according to poweroutage.us, which tracks the nation's electrical grid.
Here we are at 3.00%. As we expected, once 2.90% fell we would see 3.00% quickly. One week ago the 10-yr did move up. It took five sessions to get here. It should hold at 3.00% today and is unlikely to break above it. It’s Friday, and the sudden increase may be due for a pause; the 9-day RSI has increased to a level that will likely keep the rate from increasing in the immediate outlook, but the best we might expect is some consolidation, letting markets digest the recent spike in the 10-yr and mortgage rates. Since August 22nd the 10-year yield has increased from 2.82%, up 18 bps. And MBS rates are up about 15 bps. This week has been marked with remembrances of 2008 collapse, with most still holding a bullish outlook for the economy and equity markets. Robert Shiller commented this morning that he sees another two years of economic strength. Inflation is seen to be increasing, although so far not much, but interest rates will increase; the Fed is increasing the Federal Funds rate at the end of this month, and there is also an increasing belief that another 0.25% increase will take place at the December FOMC meeting.
PRICES @ 10:00 AM
10 yr. note: -7/32 (22 bp) 3.00% +2 bp
5 yr. note: -4/32 (12 bp) 2.90% +3 bp
2 Yr. note: -1/32 (3 bp) 2.78% +1 bp
30 yr. bond: -18/32 (56 bp) 3.14% +3 bp
Libor Rates: 1 mo 2.158%; 3 mo 2.334%; 6 mo 2.567%; 1 yr. 2.873%
30 yr. FNMA 4.0 Oct: @9:30 101.16 -14 bp (-18 bp from 9:30 yesterday)
15 yr. FNMA 4.0: @9:30 102.12 -8 b (-18 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 102.03 -5 bp (-9 bp from 9:30 yesterday)
Dollar/Yuan: $6.8558 +$0.0114
Dollar/Yen: 112.03 +0.12 yen
Dollar/Euro: $1.16567 -$0.0023
Dollar Index: 94.71 +0.17
Gold: $1208.10 -$0.10
Crude Oil: $68.55 +$0.06
DJIA: 26,153.57 +7.58
NASDAQ: 8018.67 +4.96
S&P 500: 2903.15 -1.03
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.