August 12th, 2021 9:39 AM by Richard Sardella MLO.100007700/NMLS 233568
We had two key reports at 8:30 am ET this morning. Weekly jobless claims were right on estimates (375K -12K), but the 4-week average did increase, from 394.50K to 396.25K. Claims have declined for three consecutive weeks. Roughly half of U.S. governors have ended pandemic unemployment benefit programs before their expiration next month, saying the supplemental aid has made it harder for businesses to fill a record number of job openings. Lawsuits in some of those states challenging the governors’ legal authority to end the aid could restore the halted benefits until they officially expire.
The July producer price index (PPI) turned out to be hotter than forecasts; +1.0% m/m on estimates of +0.6%, yr./yr. +7.8% against forecasts of 7.3%. Excluding the core (food and energy) the forecasts were +0.5% m/m -- as reported +1.0%. Year over year it is expected to increase from 5.6% to 6.2%. Yesterday July consumer prices were lower than forecast. The wholesale data this morning suggests CPI may increase next month when we get August data. The number of new claims filed has held relatively steady since the beginning of June in a range between 368,000 and 424,000. That’s well below the roughly 6 million new claims filed in late March and early April 2020, but above the roughly 220,000 applications filed weekly in the months before the pandemic. The initial reaction to the stronger PPI pushed MBSs down just 6 bps and the 10-yr. note yield up 1 bp from yesterday.
Covid-19’s Delta variant is hanging over markets as the number of infections increase, but the momentum in the labor market and broader economy is continuing despite the cloud of uncertainty. Earlier surges in Covid-19 cases, last summer and again in the winter, didn’t result in a prolonged stretch of job loss.
The 10-yr. note and MBS prices got a nice bump yesterday afternoon when the Treasury sold $41B of new 10-yr. notes that met very strong demand. The bidding was aggressive and the trading prior to the auction (WI) was 3 bps higher than at the actual auction. This afternoon at 1 pm the Treasury goes back to auction $27B new 30-yr. bonds.
At 9:30 am ET the stock market opened quietly; DJIA lost -12, the NASDAQ was down -21, and the S&P dropped -4. The 10-yr stood 1.37%, adding +2 bp. The FNMA 2.0 30-yr. Coupon lost -6 bps from yesterday and added +3 bps from the same time yesterday. The FNMA 2.5 was down -2 bps from the close yesterday and +9 bps from yesterday.
At 1 pm we will have a $27B 30-yr. bond auction.
It will remain quiet now until then. The 10 is trading above its 40-day average for the first time since the middle of May.
PRICES @ 10:00 AM ET
10 yr. note: 1.37% +2 bp
5 yr. note: 0.82% +1 bp
2 Yr. note: 0.22% unch
30 yr. bond: 2.01% +1 bp
Libor Rates: 1 mo. 0.096%; 3 mo. 0.121%; 6 mo. 0.157%; 1 yr. 0.242% (8/11/21)
30 yr. FNMA 2.0: @9:30 101.05 -6 bp (+3 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 103.61 -2 bp (+11 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 103.23 -3 bp (+6 bp from 9:30 yesterday)
Dollar/Yuan: $6.4806 +$0.0014
Dollar/Yen: 110.49 +0.05 yen
Dollar/Euro: $1.1728 -$0.0011
Dollar Index: 93.01 +0.09
Gold: $1747.80 -$5.50
Bitcoin: 44,392 -1949
Crude Oil: $69.11 -$0.14
DJIA: 35,366 -118
NASDAQ: 14,709 -54
S&P 500: 4437 -11
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.