December 16th, 2020 10:07 AM by Richard Sardella MLO.100007700/NMLS 233568
Interest rates edged higher in early trading this morning, stock indexes slightly higher.
At 7:00 am ET, weekly MBS mortgage applications; the composite +1.1%, purchase apps +2.0%, refinance apps +1.0%.
At 8:30 am ET, November retail sales, quite soft compared to forecasts. Sales were thought to be -0.3%, as reported -1.1%; when auto sales are removed, sales were expected +0.1%, sales fell -0.9%. The Nov control group, which exclude food services, car dealers, building-materials stores, and gasoline stations, was expected +0.1%, it fell -0.5%. Not just a weak Nov sales report, but October sales were revised lower from what was initially released (+0.3% on sales was revised to -0.1%). One more report we have seen recently that indicates the economy is slumping over the last two months—the decline in retail sales for the previous two months, the first drops since March and April. The monthly drop was most pronounced for clothing stores and restaurants, while sales at non-store retailers -- mostly e-commerce -- barely rose from October.
Still no stimulus bill, but it appears at the moment that there will be. Congressional leaders from both parties are close to agreement on a relief package worth less than $900B, which they hope to attach to crucial government spending legislation and pass by the end of the week. News from Washington this morning, a deal is in sight. Pelosi, Chuck Schumer, Mitch McConnell, and House Republican minority leader Kevin McCarthy are expected to meet this morning. "We're making significant progress and I'm optimistic that we're going to be able to complete an understanding sometime soon," McConnell said late last night as he left the Capitol. "Everybody wants to get a final agreement as soon as possible." Schumer also said the exchanges had brought progress and that all four negotiators have "a genuine desire to come to an agreement." Is today the day? Given what we hear and read, a deal is coming by Friday when a spending bill has to pass to keep the government open.
The conclusion of the December FOMC meeting is at 2:00 pm ET this afternoon. The Talk is that the Fed won't increase its bond and MBS purchases now but will put forth its plan to do so in the future with the economic outlook becoming cloudy. Since the announcements that vaccines are here, the Fed may not be so concerned that the economy will slow as it has in the last two months. Released with the policy statement, the Fed's quarterly outlook for employment, inflation, and GDP growth. What, if anything, the Fed decides to do in the meantime, including whether to focus its $120B in monthly asset purchases in a way that brings down longer-term interest rates even further, which could help industries like housing that are keyed to long-term mortgage loans will be the focus. Markets have called for, and expect it, at some point, though Fed officials have for the most part said they are not yet ready to do it. Powell's press conference after the policy statement will give him plenty to respond to.
At 9:30 am ET, the DJIA opened +7, NASDAQ +20, S&P +4. 10 yr. at 9:30 am 0.94% +3 bps. FNMA 2.0 30 yr. coupon at 9:30 am -8 bps from yesterday, and -11 bps from 9:30 am yesterday.
At 9:45 am ET, preliminary Dec PMI manufacturing and services; manufacturing expected at 56.4 as released 56.5, services expected at 56.8, as released 55.3. The composite of the two expected 57.4 as released 55.7. Germany's December Manufacturing PMI rose to 58.6 from 57.8 (expected 56.4) while Services PMI rose to 47.7 from 46.0 (expected 44.0). U.K.'s December Manufacturing PMI rose to 57.3 from 55.6 (expected 55.9) while Services PMI rose to 49.9 from 47.6 (expected 50.5). France's December Manufacturing PMI rose to 51.1 from 49.6 (expected 50.1) while Services PMI rose to 49.2 from 38.8 (expected 40.0). Japan's December Manufacturing PMI rose to 49.7 from 49.0 (expected 48.9) while December Services PMI fell to 47.2 from 47.8.
At 10:00 am ET, Dec NAHB housing market index; expected at 89 from 90 in Nov, the index fell back to 86.
At 9:30 am ET, MBS prices -8 bps. At 10:00 am, MBS prices unchanged from yesterday. This morning, the 10 yr. hit 0.95%, approaching 0.98% that has stopped attempts to test the psychological 1.00%; at 10:00 am, 0.93% +2 bps.
PRICES @ 10:00 AM ET
10 yr. note: 0.93% +2 bp (high 0.95%)
5 yr. note: 0.38% +1 bp
2 Yr. note: 0.12% unch
30 yr. bond: 1.68% +2 bp
Libor Rates: 1 mo. 0.152%; 3 mo. 0.228%; 6 mo. 0.251%; 1 yr. 0.331% (12/15/20)
30 yr. FNMA 2.0: @9:30 103.47 -8 bp (-11 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.91 -3 bp (-3 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.64 -5 bp (-8 bp from 9:30 yesterday)
Dollar/Yuan: $6.5325 -$0.0069
Dollar/Yen: 103.52 -0.15 yen
Dollar/Euro: $1.2194 +$0.0040
Dollar Index: 90.23 -0.22
Gold: $1858.90 +$2.60
Crude Oil: $47.35 -$0.27
DJIA: 30,188 -11
NASDAQ: 12,607 -12
S&P 500: 3695 +1
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.