January 10th, 2019 9:15 AM by Richard Sardella MLO.100007700/NMLS 233568
The bond and mortgage markets had an unusually quiet session yesterday. Stock indexes were also tame with increases in all three indexes. This morning in early trade, the rate markets remained unchanged from yesterday and the DJIA slightly lower. Crude oil price has increased $10.00/barrel since Christmas Eve, +$2.53 yesterday. This morning the price is lower. The dollar has fallen since the first of December. The index was at 96.91 in early November and is now at 95.29 — a little stronger.
Until two weeks ago we were at DefCon 5 in the stock market and DefCon 4 in the bond market. Since the beginning of the year stocks are back to DefCon 2 and bonds at DefCon 3. Strong December employment numbers were revealed last Friday and finally the Fed has come around to adjusting its thinking, making it clear recently that the Bank will relax its mania for continuing increasing rates. Yesterday’s minutes from the FOMC meeting in December turned out to be a different story than what Jerome Powell said after the meeting at his press conference. Turns out there was a lot of discussion within the meeting about backing off the Fed’s rate increases; Powell’s press conference sent the DJIA down 2200 points in six sessions. Since the beginning of the year the DJIA and S&P have increased 9.6% since Christmas eve. It seems the Fed lost its way and may now be forced to get back on the path.
Weekly jobless claims this morning are down 17K to 216K, while 224K was expected. Claims remain historically low and are not a subject markets are currently worried about.
At 9:30 am EST the DJIA o was at 2.71%, down -1 bp.
This afternoon at 1:00 pm the Treasury will complete the $78B of this week’s borrowing with $16B of 30s (29 yrs 10 months). The 10-yr auction yesterday was strong and well-bid even at these present low levels. Foreign buyers were less enthusiastic, likely due to the recent fall in the US dollar and the continuing negative dollar outlook.
Retail giants Macy’s and Kohl’s reported weaker than expected holiday sales taking all big retailers lower this morning. Talk now is many will lower guidance for 2019.
Yesterday the US/China trade talks ended after adding one additional day to the discussions. This morning China’s commerce ministry is saying progress was made on “structural issues” such as forced technology transfers and intellectual property rights in talks this week and more consultations are being arranged. Haven’t heard how the US thought about the talks.
The recent drop in US interest rates is now in a digestive phase and is holding well. Rates have increased over the last week, but the rebound should have been expected given the pace of the decline. The 10-yr is now holding near term support at 2.75% (2.71% this morning); the 9-day RSI momentum oscillator this morning is at critical 50; should hold and improve but if it doesn’t, strong support is at 2.82%. These are primo rates and should be taken advantage of by home buyers.
PRICES @ 10:00 AM
10 yr note: +5/32 (15 bp) 2.70% -2 bp
5 yr note: +4/32 (12 bp) 2.53% -3 bp
2 Yr note: +2/32 (6 bp) 2.53% -3 bp
30 yr bond: -3/32 (9 bp) 3.01% unch
Libor Rates: 1 mo 2.518%; 3 mo 2.798%; 6 mo 2.869%; 1 yr 3.039% (1/9/19)
30 yr FNMA 4.0: @9:30 101.94 +3 bp (+3 bp frm 9:30 yesterday)
15 yr FNMA 3.5: @9:30 101.43 +1 bp (+8 bp frm 9:30 yesterday)
30 yr GNMA 4.0: @9:30 102.44 +5 bp (+4 bp frm 9:30 yesterday)
Dollar/Yuan: $6.7878 -$0.0302
Dollar/Yen: 107.78 -0.17 yen
Dollar/Euro: $1.1524 -$0.0020
Dollar Index: 95.33 +0.19
Gold: $1292.50 +$0.50
Crude Oil: $51.94 -$0.75
DJIA: 23,758.22 -120.90
NASDAQ: 6894.32 -62.76
S&P 500: 2569.22 -15.74
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.