November 20th, 2020 9:46 AM by Richard Sardella MLO.100007700/NMLS 233568
Generally quiet in early trading this morning. Yesterday Secretary of Treasury Mnuchin surprised the Fed and markets when he announced the Treasury would end some of the emergency lending programs that were put in place last March. Jerome Powell, surprised and remarked he still wants all of the tools he has to do what may be necessary in the coming months. Mnuchin released a letter to Federal Reserve Chair Jerome Powell demanding the return of money the government provides the central bank so it can lend to certain markets in times of stress. Minutes later, the Fed issued a statement urging that “the full suite” of measures be maintained into 2021. There were the expected knee-jerk reactions in the markets, but they didn’t last long. This morning the stock indexes trading in the futures markets showed only minor changes from yesterday and interest rates fractionally lower. “I was a bit surprised” at the Treasury’s statement, Raphael Bostic, president of the Fed Bank of Atlanta, told Bloomberg TV. “Given where the economy is -- and there’s so much uncertainty still out there -- it’s prudent to keep those things open so that when people, if they do have stress, they can draw upon it.”
Biden said Thursday that he’d decided on who he will nominate as Treasury Secretary. Republicans in Congress have said the billions of dollars sent to the central bank can be deployed better elsewhere. Biden’s Treasury could agree to restart the facilities, as Mnuchin pointed to, using the Exchange Stabilization Fund. That could be one reason why credit markets may not immediately respond to the Treasury’s move. Treasury has $750B in funds to deploy that Congress approved, not sure why Mnuchin made this move now; the Fed isn’t happy, and markets so far have just yawned. Mnuchin says it isn’t political, but it is curious. There is plenty of money; Mnuchin wants Congress to re-allocate the funds and use them where most needed.
At 9:30 am ET, the DJIA opened -82, NASDAQ -6, S&P -4. 10 yr. note 0.84% unchanged. FNMA 2.0 30 yr. coupon -2 bps from yesterday’s close and +7 bps from 9:30 am yesterday.
There are no economic reports today.
Pfizer said it will apply to US health regulators on Friday for emergency use authorization (EUA) of its COVID-19 vaccine, the first such application in a major step toward providing protection against the new coronavirus, raising hopes for the end of a pandemic. The application includes safety data on about 100 children 12-15 years of age. The company said 45% of US trial participants are 56-85 years old. Of the 170 volunteers who contracted COVID-19 in Pfizer’s trial involving over 43,000 people, 162 had received only a placebo, meaning the vaccine was 95% effective, far higher than originally expected. US FDA had set a minimum bar for the efficacy of 50%. The FDA is scheduled to meet on Dec 8th. Moderna is expected to be the next company to seek a US emergency use nod for a COVID-19 vaccine. An initial analysis of data from its late-stage trial showed the vaccine was 94.5% effective. Final results and safety data are expected in the coming days or weeks.
The present concerns about the vaccines that Pfizer and Moderna have announced is distribution. Yesterday, the Trump administration held an extensive report on what Operation Warp Speed is planning, detailed plans from scientists (Fauchi and Brix), from a military general on detailed planning on distribution, saying FedEx, UPS, CVS, and Walgreens are aboard with the swift distribution.
Early this morning, when US trading started, the 10 yr. note yield dropped to 0.82%, MBS prices began +14 bps from yesterday; stock indexes were weak on the news that Mnuchin wants his money back and end some of the emergency lending programs that were put in place last March. By 10:00 am ET, markets have settled down and likely will stay calm through the rest of the day. Next week will be thin with Thanksgiving on Thursday, and not many will work on Friday; unless there is new news on the virus and vaccines next week, we expect quiet with only minor moves. The 10 yr. has technical resistance at 0.80% that should hold any improvements; the 2.0 MBS coupon has strong resistance at 103.79 price, at 103.63 presently.
PRICES @ 10:00 AM ET
10 yr. note: 0.84% unch
5 yr. note: 0.38% unch
2 Yr. note: 0.16% unch
30 yr. bond: 1.56% unch
Libor Rates: 1 mo. 0.145%; 3 mo. 0.212%; 6 mo. 0.255%; 1 yr. 0.338% (11/19/20)
30 yr. FNMA 2.0: @9:30 103.66 -2 bp (+7 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.75 -6 bp (+5 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.83 -17 bp (-3 bp from 9:30 yesterday)
Dollar/Yuan: $6.5628 -$0.0207
Dollar/Yen: 103.77 +0.02
Dollar/Euro: $1.180 -$0.0003
Dollar Index: 92.28 -0.01
Gold: $1875.70 +$14.20
Crude Oil: $41.66 -$0.08
DJIA: 29,409 -73
NASDAQ: 11,887 -18
S&P 500: 3574 -8
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.