February 4th, 2019 9:48 AM by Richard Sardella MLO.100007700/NMLS 233568
Markets began today with no real changes in the stock indexes, but the rate markets are under a little pressure after the price declines on Friday; at 8:00 am ET the 10-yr was at 2.70%, up +1 bp, and MBS prices dropped -5 bps from Friday.
Other than the ISM non-manufacturing index, auto sales, preliminary Q4 productivity, and weekly claims there isn’t a lot of key current data this week. Treasury will sell $84B of notes and bonds issuing new 10-yr notes and 30-yr bonds.
Tomorrow night is the State of the Union address; Democratic lawmakers have invited refugees and immigrants, including two who were undocumented when they worked for Mr. Trump’s Bedminster, N.J., golf club. Republicans are offering seats to law-enforcement officers, including those who work on or near the border with Mexico. Looks like both parties will fill the gallery with people that typify their positions on border security; illegal immigrants and law enforcement agents on the border. Likely another State of the Union that will be replete with applause and boos. Doubt whether whatever his speech is will be new news.
Feb 15th is fast approaching. That is the date Trump has indicated he may shut down the government again if he doesn’t get an acceptable deal with Dems over the border Wall, or declare a national emergency to bypass Congress and tap existing sources of money to build a wall. His speech tomorrow evening may provide what he is thinking. Nancy Pelosi is saying the House-Senate conference committee need to wrap up their work by Friday to allow time to vote on any plan to resolve the stalemate.
Bill Gross, once the darling and king of the bond market at PIMCO who then moved to Janus Hendersen Group where his trading didn’t make money, is retiring. “I’ve had a wonderful ride for over 40 years in my career—trying at all times to put client interests first while inventing and reinventing active bond management along the way.” You only get to keep your job managing investor money if you make money; Bon Voyage Mr. Gross.
For the first time since the 2016 election, small firms were more pessimistic about their own financial prospects than they were a year earlier, including plans for hiring and investment. Confidence among small firms, which edged downward for much of 2018, in January reached its lowest level since President Trump’s election, according to a monthly survey of 765 small firms for The Wall Street Journal by Vistage Worldwide Inc. (Vistage polls firms with between $1 million and $20 million of revenue.) Just 14% of firms expect the economy to improve this year, while 36% expect it to get worse. Nearly one in four small firms surveyed by Vistage said the Trump administration had hurt the outlook for their business.
At 9:30 am the DJIA opened down -10, the NASDAQ was up +5, and the S&P dropped -1. The 10-yr stood at 2.72%, up +3 bp.
At 10:00 am November factory orders declined 0.6% on estimates of +0.3%.
The rate markets have had a very nice rally over the last two and a half months on the Fed changing its stance about more rate increases, no inflation and still some movement into safety investments. Those events are likely over; now markets look for the next possible movement lower for rates. We believe it best now to move to a more defensive view while the digestion continues. Like a huge Thanksgiving dinner, eat until you can’t move then let it digest before starting over.
This Week’s Calendar:
No time (December and January auto and truck sales; Sec 17.3 mil; Jan 17.0 mil.)
November factory orders (+0.3%) (as reported -0.6%)
10:00 am ISM non-manufacturing index (57.1 from 57.6)
1:00 PM $38B 3-yr note auction
7:00 am weekly MBA mortgage applications
8:30 am November US trade deficit (-$54.0B)
1:00 pm $27B 10 yr note auction
7:00 pm Jerome Powell to host a town hall meeting with educators from across the country
8:30 am weekly jobless claims (220K -31K)
1:00 pm $19B 30-yr bond auction
3:00 pm December consumer credit (+$18B, down from $22.1B in November)
PRICES @ 10:00 AM
10 yr. note: -10/32 (31 bp) 2.72% +3 bp
5 yr. note: -6/32 (18 bp) 2.54% +3 bp
2 Yr. note: -3/32 (9 bp) 2.53% +4 bp
30 yr. bond: -20/32 (62 bp) 3.06% +3 bp
Libor Rates: 1 mo. 2.514%; 3 mo. 2.732%; 6 mo. 2.790%; 1 yr. 2.961% (2/1/19)
30 yr. FNMA 4.0: @9:30 101.92 -12 bp (-35 bp from 9:30 Friday)
15 yr. FNMA 3.5: @9:30101.53 -8 bp (-27 bp from 9:30 Friday)
30 yr. GNMA 4.0: @9:30 102.44 -14 bp (-32 bp from 9:30 Friday)
Dollar/Yuan: $6.7448 unch
Dollar/Yen: 110.10 +0.59 yen
Dollar/Euro: $1.1428 -$0.0030
Dollar Index: 95.84 +0.24
Gold: $1316.80 -$5.30
Crude Oil: $54.24 -$1.02
DJIA: 24,979.29 -84.60
NASDAQ: 7274.31 +10.44
S&P 500: 2700.06 -6.47
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.