August 23rd, 2021 8:55 AM by Richard Sardella MLO.100007700/NMLS 233568
For the last two weeks markets, pundits, economists, and analysts have been looking toward the Fed’s Jackson Hole symposium, (no photos of world economic leaders strolling the grounds, it’s a virtual gathering) looking for additional clues from the Fed about when the Fed will begin reducing its monthly buying of treasuries and MBSs, not recusing but selling from the Fed’s balance sheet. It is a universal belief the Fed is about to begin to unwind the QE, when isn’t clear but most are thinking the Fed will begin in October or November, others looking to early next year. Where there is little consensus though, is how will stocks and interest rates react when tapering begins? It isn’t a sure thing. Will interest rates increase or decline? Depends on the inflation outlook and the assessment of the future for stocks. If inflation becomes the centerpiece rates will increase if the equity markets swoons on weaker economic outlooks rates will decline. Strategists from Citigroup Global Markets recommend clients position for higher U.S. rates, with the bank seeing 10-year yields climbing to 2% by the end of 2021 on a longer-term economic rebound and Federal Reserve tapering. “While the near-term picture is murky, our conviction on the broader macro picture is supportive of higher” U.S. 10-year yields, Citigroup strategist Jabaz Mathai in New York wrote in a client note.
At 9:30 am ET the DJIA opened +162, NASDAQ +72, S&P +21. 10 yr. note 1.26% after increasing to 1.28% early this morning. FNMA 2.0 30 yr. coupon at 9:30 am -2 bps from Friday and -16 bp from 9:30 am Friday; the 2.5 coupon at 9:30 am +2 bps from Friday and -11 bp from 9:30 am Friday.
At 9:45 am PMI preliminary data; the composite expected 59.5, manufacturing 63.1, services 59.7; as released composite 55.4, manufacturing 61.2, services 55.2.
At 10 am July existing home sales, expected at 5.83 mil, sales 5.99 mil, up 1.5% yr./yr., inventory levels -12%, prices +17.8% yr./yr., median price $359,900.
Fannie and Freddie shy away from loans they don’t or can't insure but Wall Street has stepped in packaging mortgage loans into bonds. Mortgage investors expect the private market to keep growing as a repository of loans that Fannie and Freddie can’t or won’t purchase, such as those tied to investment properties, super-expensive homes, or self-employed borrowers. Recent issuers include Goldman Sachs Group Inc., Morgan Stanley, and JPMorgan Chase & Co., as well as a growing array of banks and real-estate firms. Private-label securities typically offer higher yields than those issued by Fannie and Freddie since they don’t come with a government guarantee that investors get paid. Issuing $42B in Q2, the most since the pandemic started and almost the most for any quarter since the last financial crisis, according to Inside Mortgage Finance.
Interest rates are not likely to move much until at least Thursday when the Fed conclave gets underway.
PRICES @ 10:10 AM
10 yr note: 1.27% +1 bp
5 yr note: 0.78% unch
2 Yr note: 0.23% unch
30 yr bond: 1.88% +1 bp
Libor Rates: 1 mo. 0.085%; 3 mo. 0.128%; 6 mo. 0.152%; 1 yr 0.236% (8/20/21)
30 yr FNMA 2.0: @9:30 101.23 -2 bp (-16 bp from 9:30 am Friday)
30 yr FNMA 2.5: @9:30 103.67 +2 bp (-11 bp from 9:30 am Friday)
30 yr GNMA 2.5: @9:30 10323 -5 bp (-10 bp from 9:30 am Friday)
Dollar/Yuan: $6.4821 -$0.0194
Dollar/Yen: 109.86 +0.08 yen
Dollar/Euro: $1.1726 +$0.0026
Dollar Index: 93.16 -0.34
Gold: $1806.00 +$22.10
Bitcoin: 50,155 +1527
Crude Oil: $65.07 $2.97
DJIA: 35,342 +223
NASDAQ: 14,865 +150
S&P 500: 4474 +33
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.