April 6th, 2021 1:15 PM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday, once again, the bellwether 10 yr. note tested and held at 1.74%, and MBS prices increased 21 bps. Technically solid support at 1.74%, with resistance now at 1.60%. Yesterday the DJIA and S&P climbed to new highs on continued strength in both the ISM manufacturing index last week and yesterday’s ISM non-manufacturing index. We also can’t overlook the very strong March employment data and the huge upward revisions in the Feb employment data. As measured by the 49-country spanning MSCI All Country World Index, Equities reached a record high as European stocks caught up with gains in Asia and Wall Street overnight in their first trading session since the Easter holiday.
The IMF says the U.S. economy is projected to expand 6.4% this year and regain its pre-pandemic size after an estimated contraction of 3.5% last year. The IMF earlier projected 5.1% growth in 2021. “Multispeed recoveries are under way in all regions and across income groups, linked to stark differences in the pace of vaccine rollout, the extent of economic-policy support, and structural factors such as reliance on tourism,” said Gita Gopinath, the IMF’s chief economist, in the latest edition of its semiannual World Economic Outlook. The IMF is increasing the outlook for Britain and the EU. Britain’s economy would grow by 5.3% in 2021, up from a previous forecast of 4.5% it made in January. Forecasts predicted growth of 4.4% for the Eurozone in 2021 and 3.6% for Germany, while France was expected to show a 5.8% expansion. Forecasts do not consider the new lockdown measures announced by France and other countries in continental Europe in recent weeks.
At 9:30 am ET, stock indexes are taking a breather after yesterday’s record increases. The DJIA opened -65, NASDAQ -22, S&P -6. 10 yr. at 9:30 am -2 bp at 1.68%. FNMA 2.5 30 yr. coupon at 9:30 +17 bps from yesterday’s close and +34 bps from 9:30 am yesterday.
At 10:00 am ET, Feb JOLTS job openings, expected 6.850 mil, as released 7.367 mil. Jan job opening revised to 7.099 mil from 6.917 mil originally reported. More evidence that employers are struggling to find workers.
Nouriel Roubini, a professor at New York University’s Stern School of Business and a former adviser to the U.S. government, said the combination of low-to-negative rates across advanced economies and fiscal stimulus is leading investors to take excessive risk. He pointed to cyclically adjusted price-earnings ratios at highs seen in 1929 and the early 2000s as one sign of recklessness. “We’re seeing widespread frothiness, bubbles, risk-taking and leverage,” Roubini said on Bloomberg TV. “Lots of players have taken too much leverage and too much risk and some of them are going to blow up.” Roubini said one shock could come if 10-year U.S. Treasury yields climb higher than 2% this year.
Not anything new with Biden’s stimulus efforts; money for infrastructure spending has some bipartisan support, but the key differences are the new definition of infrastructure. Used to be building roads and bridges and other physical improvements, now the new definition includes social elements.
The 10 yr. and MBSs both held critical levels yesterday; each time the 10 yr. approaches 1.74%, buying dries up. Yesterday’s high 1.734% before ending the day at 1.71%. This morning more follow-through pushing the note down to 1.68%. Technical resistance at 1.60%.
PRICES @ 10:00 AM ET
10 yr. note: 1.68% -3 bp
5 yr. note: 0.90% -2 bp
2 Yr. note: 0.16% -1 bp
30 yr. bond: 2.34% -2 bp
Libor Rates: 1 mo. 0.110%; 3 mo. 0.199%; 6 mo. 0.201%; 1 yr. 0.280% (4/1/21)
30 yr. FNMA 2.0: @9:30 100.23 +20 bp (+45 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 102.95 +17 bp (+34 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 103.14 +9 bp (+34 bp from 9:30 yesterday)
Dollar/Yuan: $6.5450 -$0.0219
Dollar/Yen: 109.84 -0.34 yen
Dollar/Euro: $1.1839 +$0.0026
Dollar Index: 92.48 -0.12
Gold: $1739.30 +$10.50
Bitcoin: 58,447 -363
Crude Oil: $60.12 +$1.47
DJIA: 33,521 -6
NASDAQ: 13,732 +27
S&P 500: 4083 +5 bp
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.