September 14th, 2020 9:01 AM by Richard Sardella MLO.100007700/NMLS 233568
There was not much movement in early activity; interest rates remained unchanged at 8:00 am ET, and stock indexes were trading higher.
We're still waiting for another stimulus package. Presently it doesn't look like there's a deal as both parties dig in deep to hold their lines on what they want, and likely won't get what they want. The question is, will there be any deal? Right now, the differences are so wide, and both parties don't appear to want to sit down and get something accomplished. Republicans and Democrats both are testing a risky strategy that the public -- and voters -- will blame the other side for failing to deliver help to millions of households and companies. Will Trump back down given his poll numbers are still low (although gaining these days); that is improbable as long as the economic numbers continue to improve. Some moderate Republicans are bending, and Democrats are betting that the president will be forced to go along with the largest stimulus yet proposed -- beyond the $2 trillion enacted in March -- crippled negotiations, which broke off August 7th. Senate majority leader McConnell; "I wish I could tell you we're going to get another package,"…... "But it doesn't look that good right now.". Pelosi: "I'm optimistic. I do think we should have an agreement. That's what we all want." The differences are so extreme and the present optimism Democrats have in the polls, a deal seems highly unlikely.
Kick the can; a game we played as kids, has risen to adult in Washington. On October 1st 2021, the fiscal year begins, and as has been the case for years, there will be no budget. Both parties don't want a government shutdown, so there will be another continuing resolution to keep the government from closing, a month ahead of the election. There is no way in the world (past, present, and future) there will ever be a balanced budget as deficit spending is our way of life. Pelosi and Mnuchin have agreed to work to avoid a government shutdown until after the election; neither want the heat of a shutdown. The issue will resurface again in Dec.
At 9:30 am ET, the DJIA opened +200, NASDAQ +160, S&P +34. 10 yr. at 9:30 am ET 0.67% unchanged. 2.5% FNMA 30 yr. coupon unchanged from Friday and +4 bps from 9:30 am ET. The 2.0 coupon +11 bps from 9:30 Friday).
Some economists and Wall Street analysts are pushing the Federal Reserve to provide even more simulative "forward guidance" at its policy meeting this week. Lots of crying from economists and investors that the Fed could do more, true it can, but Powell resists and continues to point to fiscal aids rather than policy tools. The more the Fed goes down the road on its own to support the economy, the greater the risks to economic well-being and its own credibility. Also, the challenges are not limited to domestic problems. With a rise in both initial and continuing filings, jobless claims added to a growing set of indicators suggesting that the pace of economic recovery from the pandemic is slowing. The ongoing stalemate in Congress on the next relief package adds to concerns about what lies ahead. Markets want to extend the anticipated period of zero policy rates and showing greater inclination to again expand the size and scope of its large-asset purchase program. In the meantime, as it does with every critical issue, Congress is dumping it all onto the Fed.
PRICES @ 10:00 AM ET
10 yr. note: 0.66% -1 bp
5 yr. note: 0.25% +1 bp
2 Yr. note: 0.13% unch
30 yr. bond: 1.41% -1 bp
Libor Rates: 1 mo. 0.152%; 3 mo. 0.250%; 6 mo. 0.281%; 1 yr. 0.413% (9/11/20)
30 yr. FNMA 2.5: @9:30 105.08 unch (+4 bp from 9:30 Friday) 2.0 103.20 +3 bp +3 bp from 9:30 Friday)
30 yr. GNMA 2.5: @9:30 104.77% +5 bp (+9 bp from 9:30 Friday)
Dollar/Yuan: $6.8116 -$0.0228
Dollar/Yen: 105.68 -0.48 yen
Dollar/Euro: $1.1881 +$0.0033
Dollar Index: 92.90 -0.43
Gold: $196800 +$20.10
Crude Oil: $37.22 -$0.11
DJIA: 27,985 +320
NASDAQ: 11,075 +223
S&P 500: 3392 +51
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.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.