January 29th, 2019 4:51 PM by Richard Sardella MLO.100007700/NMLS 233568
Today the Treasury will complete this week’s auctions with $32B in 7-yr notes. The 2 and 5-yr auctions yesterday had strong demand, although the bid/covers were not up to the average of the last 12 auctions. The January consumer confidence index and the Nov Case/Shiller 20-city home price index is also reported today.
Justice unsealed an indictment against Huawei and CFO Meng Wanzhou. The indictment alleges that the company stole trade secrets, committed wire fraud, broke confidentiality agreements, and violated sanctions against Iran. All this comes just days before the start of trade talks with China's vice premier Liu He, who arrived in Washington today. Huawei being charged by other governments is not likely to cause serious trade conflicts, even though the Chinese government is only making cursory comments.
Finally, the Mueller investigation into the 2016 election may be about to end, 2 yrs and counting. According to acting Attorney General Matthew Whitaker, “I’ve been fully briefed on the investigation, and I look forward to Director Mueller delivering the final report,”….. “Right now the investigation is, I think, close to being completed and I hope that we can get the report from Director Mueller as soon as possible.” The world awaits with bated breath.
Today the FOMC meeting gets underway. . Markets won’t get any info, but the anticipation may keep them quiet today. Tomorrow will see the policy statement while Jerome Powell’s press conference will weigh on traders today.
Six months ago we suggested gold prices would likely increase. This morning gold reached a seven month high. Not only are treasuries seeing movements to less risk, but gold has jumped into the pool also. The weakening US dollar is a major mover for the increase. Gold trades globally on the US dollar and the weakness itself propels the price higher.
Over the next few days we will see earnings reports in the high tech sector led by Apple. Techs have led the way for investors in equity markets, and how the reports are presented will have an immediate impact on stock prices. The DJIA has been down three of the last five sessions. Xerox rose 5.9% in premarket trading, and 3M Co gained 2.8% after the companies beat profit estimates.
At 9:30 am the DJIA opened up +11, the NASDAQ rose +3, and the S&P gained +2. The 10-yr was at 2.73%, down -1 bp. Some of the big buyers of mortgages yesterday didn’t keep up with markets.
At 10:00 am January’s consumer confidence index from the Conference Board is expected to be at 124.3 from 128.1; as released the index slid to 120.0. December was revised to 126.6 from 128.1, the weakest since 2017. Also at 9:00 am, the November Case/Shiller 20-city home price index was expected to be up +0.4%, but ended up +0.3%, with yr/yr at 4.7% against estimates of 4.9%; this is very old data and never a market mover, but it gets a little attention.
At 1:00 pm we will see the $32B 7-yr note auction.
PRICES @ 10:05 AM
10 yr. note: +4/32 (12 bp) 2.73% -1 bp
5 yr. note: +4/32 (12 bp) 2.56% -2 bp
2 Yr. note: +1/32 (3 b) 2.58% -1 bp
30 yr. bond: +2/32 (6 bp) 3.06% unch
Libor Rates: 1 mo. 2.501%; 3 mo. 2.750%; 6 mo. 2.829%; 1 yr. 3.030% (1/28/19)
30 yr. FNMA 4.0: @9:30 101.84 +5 bp (+15 bp from 9:30 yesterday)
15 yr. FNMA:3.5 @9:30 101.44 -2 bp (+7 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 102.39 +5 bp (-2 bp from 9:30 yesterday)
Dollar/Yuan: $6.7352 -$0.0007
Dollar/Yen: 109.44 +0.10 yen
Dollar/Euro: $1.1422 -$0.0007
Dollar Index: 95.82 +0.06
Gold: $1311.90 +$2.60
Crude Oil: $53.43 +$1.44
DJIA: 24,640.47 +112.25
NASDAQ: 7077.34 -8.35
S&P 500: 2647.85 +4.00
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.