August 2nd, 2021 9:49 AM by Richard Sardella MLO.100007700/NMLS 233568
This is employment week, on Friday. This morning the stock indexes are trading better, and interest rates began generally unchanged from Friday. The ADP kicks off the guesses on Wednesday with its private jobs data; in the meantime we will see the two IISM reports (manufacturing and non-manufacturing)
The Senate will likely pass a $550B infrastructure bill that would provide the biggest infusion of federal spending on public works in decades. The bill is a tome, 2,702 pages, which will no doubt not be read in its entirety. Majority Leader Chuck Schumer is saying that “in a matter of days”… “the bipartisan group of senators have produced a bill that will dedicate substantial resources to prepare, maintain and upgrade our nation’s critical infrastructure.” Maine Senator Susan Collins, one of the GOP negotiators, said Sunday on CNN’s “State of the Union” program, says “Every senator can look at bridges and roads and need for more broadband, waterways in their states, seaports airports, and see the benefits, the very concrete benefits, no pun intended, of this legislation.”
It includes about $110 billion in new spending for roads and bridges, $73 billion of power grid upgrades, $66 billion for rail and Amtrak, and $65 billion for broadband expansion. It also provides $55 billion for clean drinking water and $39 billion for transit. After passage in the Senate, the bill will go to the House where it could die a slow death. Nancy Pelosi has made it clear she won’t bring it to the floor until the massive $3 trillion spending bill is dealt with. Talk in the Senate that the bill may not come to a vote until after the summer recess.
On Wednesday the Treasury will announce its quarterly funding amounts, expected to be about the same as this quarter, $126. According to the news, many of the primary dealers are beginning to think that the following quarter in November will see a decline in Treasury borrowing -- less borrowing due to the pandemic and Trump’s tax cuts and Democratic plans to increase revenue with some tax increases. JPMorgan Chase predicts total net issuance of debt, including bills, at $1.46 trillion for 2022, down about $860 billion from this year. For notes and bonds alone, net issuance will be about $1 trillion less next year versus 2021, the bank says. In the meantime, the Fed will only be buying, from the secondary market, $316 billion of such securities in 2022 -- given its tapering-down from $960 billion this year, JPMorgan forecasts.
The 2-yr. suspension of the Treasury debt ceiling ended yesterday. Congress will eventually increase the debt ceiling to avoid a government shutdown and the defaulting on its debt. It isn’t if; it’s when. Janet Yellen is saying the Treasury can muddle through until the end of August, but given the way Congress works, the debt ceiling increase won’t get done until the last minute. But it WILL happen, so we can ignore all the hand wringing from financial media and political wrangling over it.
At 9:30 am ET the DJIA opened up +101, the NASDAQ added +90, and the S&P was up +23. The 10-yr. note stood at 1.21%, down -2 bps. And the FNMA 2.0 30-yr. coupon was up +9 bps from Friday and +13 bps from the same time Friday. The 2.5 30-yr. coupon added +8 bps and +14 bps from Friday morning.
At 9:45 am the July PMI manufacturing index reported in at 63.4 from 63.1 on the preliminary report. The index is the strongest since the pandemic began.
At 10 am the July ISM manufacturing index, expected at 60.8, dropped to 59.5 -- the weakest since last January. June construction spending declined 0.1% on forecasts of +0.3%.
The 10-yr. note is edging up to its next technical resistance at 1.20%, 1.21%. Technically most of the short term reads remain bullish. Today interest rates are improving, while the stock indexes are also rallying. Not a common occurrence.
PRICES @ 10:10 AM ET
10 yr. note: 1.20% -3 bp
5 yr. note: 0.67% -3 bp
2 Yr. note: 0.18% -1 bp
30 yr. bond: 1.88% -2 bp
Libor Rates: 1 mo. 0.090%; 3 mo. 0.117%; 6 mo. 0.153% ; 1 yr. 0.235% (7/30/21)
30 yr. FNMA 2.0: @9:30 102.11 +9 bp (+13 bp from 9:30 am ET Friday)
30 yr. FNMA 2.5: @9:30 104.27 +8 bp (+14 bp from 9:30 am ET Friday)
30 yr. GNMA 2.5: @9:30 103.83 +9 bp (+14 bp from 9:30 am ET Friday)
Dollar/Yuan: $6.4614 unch
Dollar/Yen: 109.36 -0.33 yen
Dollar/Euro: $1.1885 +$0.0016
Dollar Index: 91.99 -0.19
Gold: $1811.20 -$6.00
Bitcoin: 39,729 -1581
Crude Oil: $73.04 -$0.91
DJIA: 35,120 +184
NASDAQ: 14,718 +45
S&P 500: 4415 +19
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.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.