February 18th, 2021 9:43 AM by Richard Sardella MLO.100007700/NMLS 233568
Rate markets slipped a little yesterday, the 10 yr. at 1.27% -5 bps and FNMA 2.5 30 yr. coupon +18 bps after strong selling on Tuesday on very heavy selling when the Jan PPI far exceeded the forecasts in terms of price gains.
This morning trade before 8:30 am ET data had MBS prices down -14 bps, the 10 yr. 1.30% +3 bps.
Weekly jobless claims were expected at 768K, as reported 861K; The prior week claims were revised higher, from 793K to 848K (-19K revised to +36K). Based on the preceding week’s revision, claims increased 13K. A four-week high, indicating the labor market is suffering fresh setbacks even as the coronavirus pandemic shows signs of ebbing. This morning’s data will likely impact the February employment data on 3/5.
Jan housing starts at 1.580 mil was weaker than 1.655 mil forecasts, but building permits increased more than 1.670 mil to 1.881 mil. Dec starts revised higher, from 1.669 mil to 1.680 mil. Starts fell in January for the first time in five months, increasing home prices biting for many would-be buyers, and supply is thinning. Single-family housing starts, which were at the highest since 2006 by the end of last year, decreased by 12.2% to a 1.16 million pace. Multifamily starts, which tend to be volatile, surged 17.1% to a 418,000 pace, the fastest since July. Tomorrow we get Jan existing home sales.
Jan import and export prices add another inflation worry; add it to Jan PPI showing much higher price increases. Import prices were thought to be +1.0%, increased 1.4%; yr./yr. expected +0.4% increased 0.9%. Export prices were expected +0.8%, as released +0.9%; yr./yr. forecasts +0.4%, as reported +2.3%.
The February Philadelphia Fed business index expected at 20.0 from 26.5 in Jan was better than thought at 23.1.
Walmart this morning forecasting slowing sales for fiscal 2022, following a blockbuster year that saw demand for essentials and other items soar as consumers flocked to the retailer during lockdowns linked to the coronavirus pandemic.
At 9:30 am ET, the DJIA opened -210, NASDAQ -163, S&P -31. 10 yr. at 9:30 am 1.31% +4 bps. FNMA 2.5 30 yr. coupon -11 bps from yesterday’s close and unchanged from 9:30 am yesterday; the 2.0 coupon -16 bps from yesterday and -14 bps from 9:30 yesterday.
No matter how many times the Fed has said it won’t tighten if inflation moves higher and that the Fed wants inflation to move above 2.0%, markets still are not totally buying it. Recent data shows inflation fears are increasing, and as those concerns expand, the desire to hold fixed-rate bonds is lessening. Presently the worry about inflation has soured investors. Back in 2013, the Fed threatened to slow its money printing, sending long-term interest rates higher. A 2013-style “taper tantrum” was named as one of the top market risks in BofA’s February poll of fund managers who fear a pick-up in inflation expectations might soon persuade central banks to start withdrawing or “tapering” stimulus.
The technical support we had was 1.26%, the high for the 10 yr. note 11 months ago; it didn’t even get a look with the 10 yr. running right buy to its high of 1.34% on Tuesday. We continue to warn volatility is on the rise and will remain volatile now for the next couple of weeks. With little justification, our next key level for the 10 yr. is 1.50%, just a psychological level.
PRICES @ 10:00 AM ET
10 yr. note: 1.31% +4 bp
5 yr. note: 0.56% +2 bp
2 Yr. note: 0.11% +1 bp
30 yr. bond: 2.10% +6 bp
Libor Rates: 1mo 0.111%; 3 mo. 0.181%; 6 mo. 0.198%; 1 yr. 0.296% (2/17/21)
30 yr. FNMA 2.0: @9:30 101.86 -16 bp (-14 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.42 -11 bp (+1 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.17 -11 bp (+1 bp from 9:30 yesterday)
Dollar/Yuan: $6.4780 +$0.0195
Dollar/Yen: 105.83 -0.04 yen
Dollar/Euro: $1.2073 +$0.0031
Dollar Index: 90.70 -0.25
Gold: $1773.10 +$0.30
Bitcoin: $52,297 -$37
Crude Oil: $61.15 unch
DJIA: 31,437 -176
NASDAQ: 13,832 -133
S&P 500: 3904 -27
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.