January 7th, 2019 8:59 AM by Richard Sardella MLO.100007700/NMLS 233568
The rate markets took a hit on Friday, this morning a little recovery in early trade. In pre-open trading in the futures markets stock indexes generally unchanged from Friday’s strong improvements.
On trade: this morning on CNBC Wilbur Ross (Sec of Commerce) painted a little better picture on US/China trade discussions. He said he believes some of the issues can be resolved quickly, but the ‘structural’ issues will take longer and be more difficult. He put the onus on China, commenting Beijing would help determine whether trade differences between the world’s two largest economies could be resolved through negotiations. “I think there’s a very good chance that we will get a reasonable settlement that China can live with, that we can live with and that addresses all of the key issues. And to me, those are immediate trade. That’s probably the easiest one to solve.” The US and Chinese trade discussions will begin this week with face-to-face meetings for the first time. China’s economy weakening rapidly.
The ISM non-manufacturing index dropped to 57.6 from 60.7 and estimates of 58.4. New orders added 2 tenths to November's score for 62.7 in December which, next to 63.2 in June last year, is the highest in 8 years. And importantly, orders are getting a boost from foreign demand as new export orders rose 2 points to 59.5. A sharp draw in inventories which for non-manufacturers and in contrast to manufacturers are generally of secondary importance. Employment also slowed, downs 2 points to a still very healthy 56.3 which contrasts, however, with the enormous payroll surge in last week's employment report from the Labor Department.
German industrial orders fell more than expected in November, data showed, adding to a slew of recent indicators showing Germany’s exporters are suffering from the trade dispute between China and the United States. Germany's November Factory Orders -1.0% month-over-month (expected -0.2%; last 0.2%).
The shutdown continues. Regular economic releases will be delayed as a result; initially, Nov factory orders (including updates on durable goods orders) were due to be released today but won’t be. Last week Dec new home sales were not reported. On Jan11th 800K government workers will miss their first paychecks.
Not something we want to talk about, but 2019 housing market is facing some headwinds. Potential homebuyers are increasingly worrying about whether they can afford to invest; affordability is increasingly adding worries for the sector. Mortgage rates have fallen to around their lowest levels in eight months, offering a potential boost to the housing market. “I think there is latent demand on the sidelines given where rates are today,” said Sam Khater, Freddie Mac’s chief economist. “The problem is that volatility is the obstacle.”
At 9:30 the stock indexes opened as quietly as we have experienced in months; DJIA +19, NASDAQ +9, S&P +2. 10 yr. at 9:30 2.64% -2 bps from Friday. Fannie 4.0 30 yr. coupon +11 bps from Friday’s close and +5 bps from 9:30 Friday.
Still expecting the bond and mortgage markets may consolidate at these low levels; since early Nov rates have dropped significantly. Will rates continue to slide; that is where the rate markets are today? The wider look from a tech perspective still holding, the 10 has the potential to increase to 2.70% before we run into technical support. Day to day now, but potential homebuyers should not delay, these are very enticing rates.
This Week’s Calendar:
10:00 am Dec ISM non-manufacturing index
6:00 am NFIB small business optimism index (104.0 from 104.8)
8:30 am Nov trade balance (-$53.9B)
10:00 am Nov JOLTS job openings
1:00 pm $328B 3 yr. note auction
7:00 am weekly MBA mortgage applications
1:00 pm $24B 10 yr. note auction (9 yr. 10 mo.)
2:00 pm FOMC minutes from Dec 19th meeting
8:30 am weekly jobless claims (222K -9K)
1:00 pm $16B 3 yr. bond auction (29 yr. 10 mo.)
8:30 am Dec CPI (-0.1%, yr./yr. 1.9%; core +0.2%, yr./yr. 2.2%)
2:00 pm Dec Treasury budget balance
PRICES @ 10:00 AM
10 yr. note: +8/32 (25 bp) 2.64% -2 bp
5 yr. note: +5/32 (15 bp) 2.46% -3 bp
2 Yr. note: +2/32 (6 bp) 2.46% -1 bp
30 yr. bond: +25/32 (78 bp) 2.95% -4 bp
Libor Rates: 1 mo. 2.520%; 3 mo. 2.803%; 6 mo. 2.855%; 1 yr. 2.964%
30 yr. FNMA 4.0: @9:30 102.17 +11 bp (+5 bp from 9:30 Friday)
15 yr. FNMA 3.5: @9:30 101.57 +11 bp (+7 bp from 9:30 Friday)
30 yr. GNMA 4.0: @9:30 102.59 +3 bp (+3 bp from 9:30 Friday)
Dollar/Yuan: $6.8512 -$0.0182
Dollar/Yen: 108.29 -0.23 yen
Dollar/Euro: $1.1467 +$0.0070
Dollar Index: 95.72 -0.32 (breaking 96 adds more technical bearishness)
Gold: $1292.90 +$7.10
Crude Oil: $48.83 +$0.88
DJIA: 23,378.89 -54.27
NASDAQ: 6759.03 +20.17
S&P 500: 2532.40 +0.46
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.