August 4th, 2021 8:33 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday the 10-yr. note dropped to 1.15% at one point before ending the day at 1.18%; 1.13% was the low last Feb before the note rebounded back to 1.30% within 3 days. This morning early the 10 stood at 1.17%, down -1 bps. MBS prices yesterday increased 18 bps, while early this morning (9 am ET) it added +3 bps more. Yesterday the stock indexes opened the day better, but as the day progressed the indexes weakened. The DJIA at 9:30 am yesterday was up +100. At the end, down -97. Early this morning the key indexes started better.
There aren’t any economic releases today that will have any impact on markets. For factory orders for June, see below for the report.
The expiration of the Treasury debt limit expired on Sunday,. Two years ago the limit was set at $22 trillion. On Sunday the limit was reinstated at around $28.5 trillion, a figure that includes debt held by the public and by government agencies. The Treasury will suspend reinvestments by a number of retirement funds for civil servants and postal workers, according to Ms. Yellen in a letter to congressional leaders. The funds will be made whole once the debt limit is either suspended or increased, she said. The news about the debt ceiling will get attention in the media, but the likelihood of a default of Treasury debt is not likely. Markets have historically faced a default 98 times, so this is nothing new. There won’t be any reaction in US financial markets; the borrowing limit will either be increased or removed. But this is not likely though until Congress gets back in mid-September when the Treasury will have enough money to pay bills until at least October. No worries. At the end of this month the annual Jackson Hole global financial leaders will meet, making it the talking point after Friday’s employment is behind us.
On Friday the July employment data is what the bond market is focusing on, not the debt limit. In a sense it’s old news with the resurrection of COVID concerns as the Delta variant re-ignites masking and increases the worries that people will not return to work. Some states are even debating lockdowns. The July employment data precedes the new worries. The current estimates; Non-farm jobs added +900K, private jobs added +760K, and the unemployment rate was 5.7%, down from 5.9% in June. All that said, the initial market reactions won’t consider any of that until next week. In the meantime, employment is the elephant in the room this week.
At 9:30 am the DJIA opened up +79, the NASDAQ added +32, and the S&P ticked up +10. The 10-yr. note stood at 1.16%, down -1 bp from yesterday. The FNMA 2.0 3-yr. coupon and the 2.5 coupon both added +5 bps from yesterday; from 9:30 am yesterday the 2.0 coupon was up +11 bps, while the 2.5 coupon added +8 bps.
At 10 am June factory orders, in data today, expected +0.8% after increasing 1.7% in May; as released it bumped up +1.5%; May was revised to +2.3%.
Later today we will see July auto and truck sales. Expected 15.6 mil, it may be weaker due to supply chain issues.
PRICES @ 10:00 AM ET
10 yr. note: 1.16% -1 bp
5 yr. note: 0.64% -2 bp
2 Yr. note: 0.17% unch
30 yr. bond: 1.83% -2 bp
Libor Rates: 1 mo. 0.089%; 3 mo. 0.123%; 6 mo. 0.156%; 1 yr. 0.232% (8/2/21)
30 yr. FNMA 2.0: @9:30 102.23 +5 bp (+13 bp from 9:30 am ET yesterday)
30 yr. FNMA 2.5: @9:30 104.36 +5 bp (+9 bp from 9:30 am ET yesterday)
30 yr. GNMA 2.5: @9:30 103.89 +2 bp +6 bp from 9:30 am ET yesterday)
Dollar/Yuan: $6.4656 +$0.0056
Dollar/Yen: 108.92 -0.39 yen
Dollar/Euro: $1.1863 -$0.0011
Dollar Index: 92.05 unch
Gold: $1816.10 -$6.10
Bitcoin: 38, 540 -819
Crude Oil: $69.83 -$1.41
DJIA: 34,763 -75 (opened 30 minutes ago +79)
NASDAQ: 14,595 -86 (+32 at the open)
S&P 500: 4375 -12 (+10 at the open)
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.