December 17th, 2020 10:24 AM by Richard Sardella MLO.100007700/NMLS 233568
Three economic releases this morning at 8:30 am ET. Weekly jobless claims were expected at 806K and came in at an increase of 885K; the prior week was revised from 853K to 862K. The 4-week average increased to 812.5K from 778.25K. Claims now the highest level in the last three months. Continuing claims declined by 273K, although it is misleading; it matches the state unemployment data but does not include the millions of people who have already exhausted those benefits or are receiving assistance through federal pandemic jobless aid programs. According to the Labor Dept, the increase in initial claims reflects rising filings in California and Illinois, two states where governments have imposed particularly restrictive lockdowns. Jobless claims are above their 665,000 peak during the 2007-09 Great Recession, though they have dropped from a record 6.867 million in March.
Dec Philadelphia Fed manufacturing index expected at 21.1, weaker at 11.1.
Nov housing starts and permits; starts expected at 1.530 mil increased to 1.547%; building permits sky-rocked to 1.639 mil on estimates of 1.553 mil, up 6.2% from October. Residential starts rose 1.2%; strong demand for new homes thanks to record-low mortgage rates and buyers looking for bigger spaces during the pandemic. Housing starts are back to levels set last February. Single-family starts rose for a seventh month to a 1.186 million annualized rate that was the highest since 2007, while starts for projects with five or more units, a category that tends to be volatile and includes apartments and condos, increased to 352,000. Permits rose to the best level since 2006.
The expected stimulus package is still progressing, but slowly. Talk this morning is it may drag on through the weekend. The proposal draft includes $600 in payments for individuals, $300-per-week in supplemental unemployment insurance payments and aid for small businesses, and roughly $17 billion for airlines. But it omits aid to state and local governments and lawsuit liability protection, the two issues that have stymied earlier attempts at an agreement. A stimulus package will be attached to a $1.4 trillion spending bill to fund the government through its fiscal year ( October 2021). Some 7.8 million Americans have fallen into poverty since June as benefits from the prior virus relief package lapsed, according to an analysis of ongoing Census data by economists at the University of Chicago and the University of Notre Dame. The poverty rate has increased by 2.4%, double the largest annual increase since the 1960s.
At 9:30 am ET, the DJIA opened +144, NASDAQ +70, S&P +21.10 yr. at 9:30 am 0.90% -2 bps. FNMA 2.0 30 yr. coupon at 9:30 am +11 bps from yesterday’s close and +17 bps from 9:30 yesterday. MBSs this morning were driven by the strong housing starts and permits and belief that the Fed will continue to buy MBSs for as long as necessary, at least the next year the way it looks now.
The FOMC and Powell said yesterday the Fed will continue to funnel huge amounts into treasury and MBS buying. The central bank stated those purchases would continue “until substantial further progress has been made” toward broader employment and inflation goals. Officials don’t expect to reach those goals for years, according to projections they released yesterday. Equity markets have been among the main beneficiaries of accommodative policy through the virus outbreak. The stimulus bill will be passed, based on the equity market advances; it is a sure thing. On inflation, “It’s not going to be easy to have inflation move up,” said Mr. Powell. “We’re honest with ourselves and with you in the [projections] that even with the very high level of accommodation that we’re providing…it will take some time.” Good news for the equity and long term interest rate markets.
As is the case most days recently, MBSs and treasuries won’t move much through the rest of the day. Over the past three months, almost every movement in rates and MBSs have occurred before 10:00 am ET; that is what we expect again today.
PRICES @ 10:00 AM ET
10 yr. note: 0.90% -1.5 bp
5 yr. note: 0.36% unch
2 Yr. note: 0.13% unch
30 yr. bond: 1.64% -2 bp
Libor Rates: 1 mo. 0.157%; 3 mo. 0.236%; 6 mo. 0.255%; 1 yr. 0.333% (12/16/20)
30 yr. FNMA 2.0: @9:30 103.64 +11 bp (+18 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 105.03 +6 bp (+12 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.88 +11 b (+24 bp from 9:30 yesterday)
Dollar/Yuan: $6.5330 unch
Dollar/Yen: 102.90 -0.56 yen
Dollar/Euro: $1.2254 +$0.0054
Dollar Index: 89.81 -0.64
Gold: $1898.80 +$39.70
Crude Oil: $48.30 +$0.48
DJIA: 30,289 +135
NASDAQ: 12,731 +74
S&P 500: 3718 +17
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 the tbwsgroup 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.