June 9th, 2021 9:12 AM by Richard Sardella MLO.100007700/NMLS 233568
Interest rates continue to decline again this morning. The 10 yr. broke a key support level yesterday, closing at 1.54%. This morning selling of 10 yr. notes pushing the rate down to 1.49%, also breaking the next technical resistance at 1.50%. Finally, the fear of inflation is waning somewhat. There is no reason to believe there won't be any increases in prices and an increase in the inflation rate. The markets haven't capitulated entirely on the potential of inflation, just not as worried about a little increase that, according to the Fed, won't be much and won't last long when the supply chains heal and begin to return to normal in a few months. Interest rates are falling in Germany; its 10 yr. bund now at the most negative over the last month.
A gauge of expected volatility in interest rates has dropped to its lowest since March, as markets show a willingness to look through short-term releases. Incoming data so far have done little to dissuade the Federal Reserve from its argument that price rises will be temporary, keeping the bond market supported. Last week's much-anticipated payroll numbers showed US job growth picked up in May, but not enough to intensify worries about rising inflation. One takeaway on the decline in rates today and yesterday; tomorrow's CPI report that provides consumer prices isn't likely to bother traders; the current estimates for May CPI, +0.4%, ex-food and energy +0.4%. Annually prices are expected to climb 4.2% on an annualized basis in April, the most since 2008, and economists expect a figure of 4.7% in May.
Globally interest rates are declining today, adding support for the US rate slide this morning. China's most widely watched inflation measure -- the producer price index -- surged to its highest since 2008, surpassing estimates. China's bond yields responded with a shrug, sitting little changed on the day. China's May CPI was down 0.2% m/m (expected -0.1%; last -0.3%) but up 1.3% yr./yr. (expected 1.6%; last 0.9%). May PPI was up 9.0% yr./yr. (expected 8.5%; last 6.8%).
Biden departed for Britain this morning on his first trip abroad since taking office, an eight-day mission. The first stop, the G-7 meeting. Next week on the 16th, Biden is scheduled to sit down with Putin, his last stop in Europe. Tomorrow he will have a meeting with British Prime Minister Boris Johnson. His trip also includes travels to Brussels for talks with leaders of NATO and the European Union.
This morning we got weekly MBA mortgage applications for last week; the composite down 3.1%, purchase apps +0.3%, while refinance apps fell again -5.0%.
At 9:30 am ET, the DJIA opened quietly +2, NASDAQ opened +64, S&P +7. 10 yr. note at 1.48% -6 bps from yesterday (by 10:00 am at 1.47%). FNMA 2.5 30 yr. coupon +13 bps from yesterday's close and +6 bps from 9:30 am yesterday.
At 10:00 am ET, April preliminary wholesale inventories expected +0.8%, as reported +0.8%.
This afternoon at 1:00 pm ET, Treasury sells $38B of 10 yr. notes. Given the recent decline in the 10 yr. rate and the damage done to technical support levels, markets will be paying close attention to the demand.
PRICES @ 10:00 AM ET
10 yr. note: 1.47% -7 bp
5 yr. note: 0.73% -4 bp
2 Yr. note: 0.15% unch
30 yr. bond: 2.16% -6 bp
Libor Rates: 1 mo. 0.077%; 3 mo. 0.128%; 6 mo. 0.154%; 1 yr. 0.240% (6/8/21)
30 yr. FNMA 2.0: @9:30 101.34 +20 bp (+11 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 103.72 +13 bp (+6 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 103.31 +17 bp (-2 bp from 9:30 yesterday)
Dollar/Yuan: $6.3850 -$0.0155
Dollar/Yen: 109.28 -0.21 yen
Dollar/Euro: $1.2208 +$0.0035
Dollar Index: 89.88 -0.20
Gold: $1900.90 +$6.50
Bitcoin: 34,863 +1225
Crude Oil: $70.34 +$0.29
DJIA: 34,592 -18
NASDAQ: 13,968 +43
S&P 500: 4231 +4
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.