February 11th, 2019 3:36 PM by Richard Sardella MLO.100007700/NMLS 233568
The last three sessions in the bond and mortgage markets haven’t seen any movement from the early morning prices and rates through the entire day; today is the same. MBS prices traded in a three basis point range and are ending the session where it started this morning.
This week Washington is facing another potential shutdown if by Friday there is no deal acceptable to President Trump and Republicans. Given all of the barbs and Democrats’ resolve to stop the Wall and Trump’s rock hard stance for it, it isn’t likely there will be a wall. As you know, he can try to use the emergency national security act to get funding from other sources and build it. Problem with that is there will be immediate lawsuits to stop it, likely leading to a temporary restraining order that when played out will potentially keep the Wall from being built.
Trade issues with China still working with negotiators in China now after two days in the US last week. There may be some progress with tariffs, but the main event is the intellectual property that China stalls and/or forces American companies to give up. China will probably be willing to import more US goods but getting any agreement over property rights is going to be difficult. On March 1st US tariffs on $200B of goods imported from China is set to increases from 10% to 25% unless Trump relents.
Another sour forecast for the equity markets this year; we've had downward revisions for growth the Fed, IMF, World Bank, the ECB, Bank of England and about anyone stepping up to offer their outlook. Today Vanguard Mutual funds with $5.3 trillion in US and global assets, saying the annual returns for investors in equities is about 5% return if you're lucky. As for the economy, which is coming off what's expected to be about a 3% growth rate for 2018, Vanguard sees U.S. gross domestic product rising around 2% this year. More sour news from Goldman Sachs, they're forecasting slower growth and profits for the rest of the year — which could be bad news for investors who missed January’s rally. “The rally we expected has happened swiftly, and given this we see relatively modest returns on equities from here," Goldman Sachs analyst Sharon Bell commented on CNBC this morning.
There were no data points today, tomorrow not much; the Jan NFIB small business optimism index expected at 103 from 104.4 in Dec. Dec JOLTS job openings, 6.900 mil from 6.888 mil in Nov. Jerome Powell will speak at 12:45 pm ET the subject, on economic development in high poverty rural communities at the Hope Enterprise Corporation Rural Policy Forum; but there will be Q&A that will likely lead to more questioning on the Fed’s outlook. Beginning Wednesday some of the delayed economic reports will begin trickling; CPI, Treasury Budget. Thursday retail sales, PPI. More will ooze out next week.
Our tech models are still positive although there has been minimal movement in either direction. Fundamentally there is reason to move money to safety.
This Week’s Calendar:
6:00 am NFIB small business optimism index (103.0 from 104.4)
10:00 am December JOLTS job openings (6.950 mil from 6.888 mil)
7:00 am weekly MBA mortgage applications
8:30 am Jan CPI (+0.1%; yr./yr. +1.5%; core CPI +0.2%; yr./yr. +2.1% down from +2.2% in December)
2:00 pm Dec Treasury Budget (-$12.0B)
8:30 am weekly jobless claims (225K -9K)
10:00 am November business inventories (+0.2%)
8:30 am February Empire State manufacturing index (7.0 from 3.9)
9:15 am January industrial production and factory use (production +0.2%; factory use 78.8% from 78.7%)
10:00 am University of Michigan mid-month consumer sentiment index (92.5 from 91.2 in Jan)
PRICES @ 4:00 PM
10 yr. note: -7/32 (22 bp) 2.65% +2 bp
5 yr. note: -4/32 (12 bp) 2.47% +3 bp
2 Yr. note: -2/32 (6 bp) 2.49% +3 bp
30 yr. bond: -14/32 (44 bp) 3.00% +3 bp
Libor Rates: 1 mo. 2.504%; 3 mo. 2.697%; 6 mo. 2.741%; 1 yr. 2.935% (2/8/19)
30 yr. FNMA 4.0: 102.19 -11 bp (+3 bp from 9:30)
15 yr. FNMA 3.5: 101.71 -5 bp (unch from 9:30)
30 yr. GNMA 4.0: 102.69 -9 bp) -1 bp from 9:30)
Dollar/Yuan: $6.7924 +$0.0476
Dollar/Yen: 110.40 +0.66 yen
Dollar/Euro: $1.1278 -$0.0048
Dollar Index: 97.07 +0.42
Gold: $1312.20 -$6.30 (strong dollar; gold trades in dollars)
Crude Oil: $52.39 -$0.32 (strong dollar; crude settles in dollars)
DJIA: 25,053.11 -53.22
NASDAQ: 7307.90 +9.71
S&P 500: 2709.80 +1.92
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.