CHM Blog

Overnight the 10 year note yield declined 3 bps to 4.31%, by 8:30 am ET back to unchanged. The keys today, Jerome Powell talking at 11 am and again at 2 pm. Expect to hear his take on recent beliefs the Fed is finished, safe to bet he will make it clear it is all data dependent, his go to comment when talking about the future of Fed actions. With increasing speculation the Fed will begin lowering rates in the spring, will he push back against that growing belief?

Not a concern, but beside Powell Chicago Fed President Austin Goolsbee is also speaking.

November was a huge month for the bond and mortgage markets, the 10 year note according to Dow Jones Market Data declined 53 bps in the month, from its high on 10.24/23 the yield has fallen 66 bps.

Looking for a good investment? Bill Gross, formerly founder of PIMCO saying mortgage REITs might be the answer. After years of being beaten down as the Fed increased rates, Gross sees value in mortgage REITS, the high-rate mortgages in these funds is going to attract investors as yields decline and REITS are required to disperses 90% of taxable income to investors. He isn’t alone in his view, UBS is on board, “With the Fed’s exit from the MBS market priced in, spreads historically wide, and significant book value damage already in the books, we see the sector set up for period of robust and sustainable total returns.”

At 9:30 am the stock indexes opened flat after the DJIA increased 520 points yesterday. The DJIA opened –6, NASDAQ -44, S&P -8. 10 year note at 9:30 am 4.34% +1 bp. FNMA 6.5 30 year coupon at 9:30 am unchanged from yesterday’s close and -6 bps from 9:30 am yesterday.

Two data points at 9:45 am and 10 am, November ISM manufacturing index expected a 47.5 from 46.7, the index increased to 46.7, still in contraction. At 10 am October construction spending expected +0.3% increased 0.6%, September revised from 0.4% to +0.2%.

Powell scheduled at 11 am and again at 2 pm; what he says at the morning commentary is likely to set the tone for the rest of the session.

PRICES @ 10:00 AM

10 year note: 4.29% -5 bp

5 year note: 4.22% -5 bp

2 year note: 4.65% -6 bp

30 year bond: 4.48% -1 bp

30 year FNMA 7.0: @9:30 am 102.66 +4 bp (+9 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 101.58 unchanged (-6 bp from 9:30 am yesterday)

30 year FNMA 6.0: @9:30 am 100.30 +2 bp (-8 bp from 9:30 am yesterday)

30 year GNMA 6.0: @9:30 am 100.71 unch (-6 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1240 -$0.0049

Dollar/Yen: 148.12 -0.10 yen

Dollar/Euro: $1.0856 -$0.0032

Dollar Index: 103.56 +0.07

Gold: $2061.70 +$4.50

Bitcoin: 38,166 +531

Crude Oil: $76.08 +$0.12

DJIA: 36,068 +117

NASDAQ: 14,204 -22

S&P 500: 4572 +4

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 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.