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Daily Market Analysis February 19, 2021

February 19th, 2021 9:53 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

The day began with stock indexes holding small gains and interest rates ticking higher, the 10 yr. at 8:00 am ET +2 bps to 1.31%, MBS price -9 bps.

Janet Yellen on CNBC late yesterday continued to add her support to the big stimulus package, saying she has no worries about the impact of higher debt coming. She pointed to getting the economy rolling as the most urgent issue facing Congress and markets. She's not concerned about the recent uptick in inflation and inflation forecasts. No worries, the Fed will print more money. On inflation, Yellen said that is a risk, but she added that inflation has been very low for many years and that the Federal Reserve has the tools to confront that risk by raising interest rates. She isn't worried about being able to finance more deficit spending, saying investor appetite for Treasury debt is robust. "We are digging out of a deep hole," Ms. Yellen said of the economic slump induced by the Covid-19 pandemic. "We think it's very important to have a big package that addresses the pain this has caused." Republicans and some economists have questioned whether the proposal, which would include $1,400 stimulus checks for many Americans, provide extended unemployment insurance, and deliver aid for state and local governments, would give more support than the economy needs.

More spending is on the way, according to Yellen's comments. The next step after the $1.9 trillion package, which will likely pass next week, is a second economic recovery package that would include spending on longer-term investments, such as infrastructure, renewable energy, education, job training, research, and development. That proposal would also include tax increases on corporations and wealthy Americans that would be phased in overtime, she said.

At 9:30 am ET, the DJIA opened +55, NASDAQ +69, S&P +10. 10 yr. at 9:30 am 1.32% +3 bps. 2.5 30 yr. FNMA coupon at 9:30 -11 bps from yesterday's close and -3 bps from 9:30 am yesterday.

At 9:45 am ET, Feb PMI Flash composite indexes; the composite index expected at 57.9 increased to 58.8; the manufacturing component expected at 59.0 slipped to 58.5; the services index was thought to be 57.7 from 57.5 in Jan increased to 58.9.

At 10:00 am ET, January's existing home sales were expected at 6.600 mil, as reported 6.690 mil.

Seeing more comments that more people are becoming concerned about the strong rise in equity markets recently. After the fastest bear-to-bull market switch last year has prompted market mavens to flag worries about pricey assets, with BofA calling it the "mother-of-all asset bubbles." For instance, the Fed has been purchasing bonds at a record pace, doubling its balance sheet to nearly $8 trillion in less than a year. Goldman Sachs' Chief Executive David Solomon and strategists at some major investment banks have since January been warning about stock market volatility, particularly in the immediate future. As financial assets worth $1.1 billion are gobbled up by global central banks every hour, there is irrational exuberance on Wall Street, according to BofA. The number of outlooks recently have become increasingly nervous, but equity markets keep on going with no other place to go with massive stimulus checks, governments buying debt, and comments like Janet Yellen's yesterday.

Interest rate holding low and expected to stay that way with all central banks and the US Treasury completely behind more monetary and fiscal spending. It is rare to experience the almost over-the-top bullishness for added spending from the Fed and Treasury, not to mention the enthusiasm for spending from Congress. The more conservative voices completely blocked out. If we are going to see any significant improvement in mortgage rates, it will happen on the back of major selling of US and global equities. Otherwise, rates are poised to increase; our next technical support doesn't come into play until the 10 yr. note reaches 1.50%.

PRICES @ 10:00 AM

10 yr. note: 1.32% +3 bp

5 yr. note: 0.57% +2 bp

2 Yr. note: 0.11% +1 bp

30 yr. bond: 2.11% +3 bp

Libor Rates: 1 mo. 0.111%; 3 mo. 0.182%; 6 mo. 0.196%; 1 yr. 0.291% (2/18/21)

30 yr. FNMA 2.0: @9:30 101.83 -12 bp (-3 bp from 9:30 yesterday)

30 yr. FNMA 2.5: @9:30 104.39 -11 bp (-3 bp from 9:30 yesterday)

30 yr. GNMA 2.5: @9:30 104.22 -9 bp (+5 bp from 9:30 yesterday)

Dollar/Yuan: $6.4868 -$0.0014

Dollar/Yen: 105.50 -0.18 yen

Dollar/Euro: $1.2121 +$0.0026

Dollar Index: 90.33 -0.26

Gold: $1779.30 +$4.30

Bitcoin: $52,905 +$846

Crude Oil: $60.12 -$0.40

DJIA: 31,591 +98

NASDAQ: 13,937 +71

S&P 500: 3927 +13

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on February 19th, 2021 9:53 AM

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