December 15th, 2020 8:41 AM by Richard Sardella MLO.100007700/NMLS 233568
Interest rates were unchanged at the beginning of trading in the US this morning. At 8:00 am ET, MBS prices down 3 bps from yesterday. At 8:30 am November import prices expected +0.3%, up just 0.1%; yr./yr. expected -0.9% declined 1.0%. Nov exports prices expected +0.3% increased 0.6%; yr./yr. -1.1% on forecasts of -1.5%. Also, at 8:30 am Dec Empire State manufacturing index was thought to be at 5.8 from 6.3 in Nov, as released 4.9. The two reports didn’t change the MBS price down 3 bps from yesterday.
At 9:15 am ET, Nov industrial production and capacity utilization. Production increased 0.4% with forecast of +0.3%; manufacturing expected +0.4% increased 0.8%. Capacity utilization at 73.3% on estimates of 73.0% and 72.8% in October.
At 9:30 am ET, the DJIA opened +170, NASDAQ +102, S&P +27. 10 yr. at 9:30 am 0.91% +2 bps. FNMA 2.0 30 yr. coupon at 9:30 am -6 bps from yesterday’s close, and +5 bps from 9:30 am yesterday.
The FOMC meeting begins this morning, nothing until tomorrow afternoon. The focus on the FOMC is about what the Fed will do about its bond-buying program, which could finally catapult 10-year yields above 1%, even if only briefly. It depends on whether the Fed will increase buying of long-dated securities or keep the pace as it is now. Still no stimulus, but the consensus among economists is that the Fed won’t increase its purchases at this meeting but set up the potential it will do at the January meeting. Powell will likely be pressed for more specifics at his press conference after the meeting. The Fed is presently buying about $80B a month in Treasuries broadly across the yield curve, in a program designed to put downward pressure on real borrowing costs for households and businesses. It’s also purchasing $40B a month in mortgage-backed securities.
Warren Buffett on CNBC this morning urged Congress to extend aid to small businesses as they continue to struggle through economic shutdowns used to fight the coronavirus pandemic. Specifically, Buffett asked lawmakers to extend the Paycheck Protection Program. “I think the country owes it to the millions of small-business people … just renew the PPP and get us to the end of the tunnel,” Buffett said. “When we went into World War II, a lot of industries were shut down; everything went to the defense production. Well, we’ve shut down a lot of people in this particular induced recession and others are prospering.” Without additional aid for small businesses, Congress is “in the process of dashing the dreams of tens of thousands,” Buffet said. “Congress should act.”
Talks in Congress were underway late yesterday to agree on a bill to avert a government shutdown, with Democrat and Republican leaders appearing more upbeat about including a fresh round of coronavirus aid, the first new relief measure since April. Friday is the deadline to pass a spending bill to keep the government operating. Will the bill have a stimulus package included? Pelosi and Chuck Schumer face pressure to allow a vote on a Covid-19 assistance plan without the aid for states they’ve said is vital after a bipartisan group split that and liability protections from other relief spending. A bipartisan group that had floated a $908B plan at the start of the month offered it up in two bills yesterday, with a $748B core piece separate from $160B in state and local aid and liability protection. Senator Dick Durbin, the No. 2 Democrat in that chamber, favored allowing a vote on a package without the two more tedious elements.
Vaccines started yesterday in the US with the Pfizer vaccine. Moderna’s vaccine is safe and effective for preventing Covid-19, the US the FDA said, clearing the way for a second shot to quickly gain emergency authorization and add to the country’s sprawling immunization effort. The report was posted online ahead of a meeting Thursday of agency advisers who will vote whether to recommend authorization before a final FDA decision. The pressure is building in Europe for quick approval of Pfizer’s vaccine. Germany is “optimistic” that the European Medicines Agency will be able to make a decision by Dec. 23, Globally there are increasing shutdowns as the virus spread has increased.
Treasury Secretary Steven Mnuchin has all but ruled out letting Fannie Mae and Freddie Mac exit US control before he steps down, leaving it to the Biden administration to decide the fates of the mortgage giants.
PRICES @ 10:00 AM ET
10 yr. note: 0.91% +2 bp
5 yr. note: 0.37% +2 bp
2 Yr. note: 0.12% unch
30 yr. bond: 1.65% +2 bp
Libor Rates: 1 mo. 0.153%; 3 mo. 0-.219%; 6 mo. 0.247%; 1 yr. 0.334% (12/14/20)
30 yr. FNMA 2.0: @9:30 103.58 -6 bp (+5 bps from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.94 +2 bp (+16 bps from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.72 +5 bp (+13 bp from 9:30 yesterday)
Dollar/Yuan: $6.5423 -$0.0085
Dollar/Yen: 103.77 -0.28 yen
Dollar/Euro: $1.2156 +$0.0014
Dollar Index: 90.62 -0.09
Gold: $1851.10 +$19.00
Crude Oil: $47.23 +$0.24
DJIA: 29,925 +68
NASDAQ: 12,534 +95
S&P 500: 3669 +22
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.