January 30th, 2019 2:46 PM by Richard Sardella MLO.100007700/NMLS 233568
In early activity this morning the 10-yr was up 1 bp to 2.72%, with stock indexes rallying on Apple earnings and forward guidance and Boeing’s earnings being announced. In pre-open trading the DJIA added +250 points.
Weekly MBA mortgage applications are down again. The composite dropped -3.0%, purchases were lower by -2.0%, and refinances lost -6.0%. Refis should have been better with mortgage rates lower.
The January ADP private jobs were expected to add +174K . As reported they were up 213K; December revised from 271K to 263K. Strong jobs and not much of a December revision that was about 100K above the estimates then.
The advance Q4 GDP was due out at 8:30 am ET but was another delayed data point. The delayed economic releases keep mounting up with key reports having been pushed back by the shutdown. Even though the government is open again, there isn’t much news as to when the various departments will catch up.
Treasury supply is escalating, borrowing to fund the debt that exceeds revenues. This week we had $113B of 2s, 5s, and 7s. Next week it is the quarterly refunding of 3s, 10s, and 30s. The estimates were for a total of $84B which is what Treasury announced this morning; refunding $54.1 billion in Treasury notes maturing on February 15, 2019 and raising $29.9 billion in new cash. The refunding package consists of $38 billion in 3-year notes, $27 billion in 10-year notes, and $19 billion in 30-year bonds. The auctions next week take place on Tuesday, Wednesday, and Thursday; it’s rare that the Treasury holds two major borrowing events two weeks running. Wall Street strategists are projecting new debt issuance will top $1 trillion for a second straight year. Combined with needing to fund the shortfall, the Treasury has been selling more debt as a result of the Federal Reserve’s strategy to slowly let government debt roll off its balance sheet. This afternoon’s FOMC policy statement may imply the Fed will back off of selling its balance sheet.
Earnings are moving stocks higher this morning, with trade talks hitting a new critical round today amid profound differences over Washington’s demands for structural economic reforms from Beijing that will make it difficult to reach a deal before a March 2 U.S. tariff hike. The talks that begin today and conclude tomorrow are the highest-level talks since U.S. President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce in their trade war in December. Trade is still a key factor for global markets and economies, but recently we have not noticed any direct reactions in the US equity markets. Sources are saying there has been little indication that Chinese officials are willing to address core U.S. demands to protect American intellectual property rights and end policies that Washington says force U.S. companies to transfer technology to Chinese firms.
The FOMC meeting concludes at 2:00 pm this afternoon with the policy statement, with Powell’s recent comments that the Fed may be ready to pause. The statement, as usual, will hold clues if you are a specialist in Fedspeak. Most of us are not, but we can expect a consensus to be formed, also as usual. Powell will hold his press conference after the meeting (2:30 pm). At last month’s press conference Powell made comments that were somewhat different than what the policy statement implied.
At 10:00 am the NAR reported pending home sales — another soft report. Estimates were sales to be down 0.3%. As reported they dropped -2.2%, with contracts signed but deals not yet closed.
We are looking for markets to settle into a quiet trade until this afternoon’s FOMC meeting and Powell’s press conference.
PRICES @ 10:00 AM
10 yr. note: -3/32 (9 bp) 2.72% +1 bp
5 yr. note: -2/32 (6 bp) 2.56% +2 bp
2 Yr. note: unch 2.57% unch
30 yr. bond: -1/32 (3 bp) 3.04% unch
Libor Rates: 1 mo. 2.498%; 3 mo. 2.744%; 6 mo. 2.823%; 1 yr. 3.023%
30 yr. FNMA 4.0: @9:30 101.86 -8 bp (+2 bp from 9:30 yesterday)
15 yr. FNMA 3.5: @9:30 101.47 +2 bp (+5 bp from 9:30 yesterday)
30 yr. GNMA 4.0: @9:30 102.39 -3 bp (-1 bp from 9:30 yesterday)
Dollar/Yuan: $6.7164 -$0.0165
Dollar/Yen: 109.67 +0.28 yen
Dollar/Euro: $1.1415 -$0.0021
Dollar Index: 95.93 +0.13
Gold: $1316.00 +$0.80
Crude Oil: $54.03 +$0.72
DJIA: 24,798.20 +218.24
NASDAQ: 7078.87 +40.57
S&P 500: 2648.87 +8.87
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.