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Daily Market Analysis December 29, 2020

December 29th, 2020 9:44 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

Early this morning, the 10 yr. note yield at 0.95% +2 bps after declining 2 bps yesterday; stock indexes in futures trade were higher. Yesterday the House passed a virus bill that would pay people $2,000 instead of the $600 that was passed last week and signed on Sunday by the President. Trump advocated the increase, and the House was pleased to take it up; Democrats and moderate Republicans voted in favor of a proposal. The bill cleared the House on a 275 to 134 vote, reaching the two-thirds majority needed for the expedited procedure needed. Not enough for Democrats in the House, they added eligibility of household members who can get the money, allowing adult dependents, as well as child dependents, to receive the payments. Currently, just children of adults under the income caps qualify for the payments.

The bill now moves to the Senate, where its passage is questionable. What will Senate Republicans do now is the momentary issue? Many Republicans in the Senate were opposed to any stimulus over $600, concerned about the ballooning federal debt. Going from $600 to $2,000 will add about $464B to the debt. So far, nothing from Mitch McConnell about what he intends; vote on the House bill, don't take it up so it dies, or vote on another plan. $2000 as written will give many that are presently working and encourage many not to work because the stimulus would be more than if they worked.

The House also voted to override President Trump's veto of a $740.5B defense policy bill, sending the bill to the Senate and putting it on track to be the first legislation to become law over Mr. Trump's objections. The override vote, which required a two-thirds supermajority, was 322 to 87. The Senate is expected to consider the bill as soon as tomorrow. Trump objects to the removal of base names honoring Confederate officers and set troop levels abroad, as well as the legislation's lack of language revoking internet platforms' broad immunity for the content they publish from users on their sites.

Markets are chewing on what effect the increase in stimulus payments will have in the Georgia senate run-off voting. Republican candidates blind-sided by Trump's proposal, will it help or hurt? The non-partisan Committee for a Responsible Budget estimates that the bigger payments would raise disposable income in the first quarter to as much as 25% above pre-pandemic levels, pushing stock indexes higher and, if passed, will send interest rates higher, above 1.0%. Investors have much to think about as the stock indexes continue to make new highs daily.

At 9:00 am ET, the October Case/Shiller house price index was expected +0.7%, the price increased 1.6%, the 20 city data yr./yr. thought to be +6.9% increased 7.9%.

At 9:30 am ET, the DJIA opened +155, NASDAQ +67, S&P +19. 10 yr. at 9:30 am 0.95% +2 bps. FNMA 2.0 30 yr. coupon +2 bps from yesterday’s close and +9 bps from 9:30 am yesterday.

At 1:00 pm ET, this afternoon Treasury will auction a record $59B 7 yr. note. Yesterday the 5 yr. auction was soft with less demand.

Normally, this time of year, there isn't much for markets. This year there is a plate full of yet undecided key issues. The stock market is betting higher stimulus payments; the bond market is more conservative and hasn't moved.

The demand for MBSs remains very strong, outpacing the 10 yr. note in terms of continuing declines in rates. Better returns with no worries over duration risk attracting investors.

PRICES @ 10:00 AM ET

10 yr. note: 0.94% +1 bp

5 yr. note: 0.38% unch

2 Yr. note: 0.13% unch

30 yr. bond: 1.68% +2 bp

Libor Rates: 1 mo. 0.145%; 3 mo. 0.240%; 6 mo. 0.266%; 1 yr. 0.340% (12/28/20)

30 yr. FNMA 2.0: @9:30 103.63 +2 bp (+11 bp from 9:30 yesterday)

30 yr. FNMA 2.5: @9:30 105.16 unch (+3 bp from 9:30 yesterday)

30 yr. GNMA 2.5: @9:30 105.17 -8 bp (+9 bp from 9:30 yesterday)

Dollar/Yuan: $6.5306 -$0.0065

Dollar/Yen: 103.53 -0.26 yen

Dollar/Euro: $1.2272 +$0.0058

Dollar Index: 89.94 -0.40

Gold: $1883.80 +$3.40

Crude Oil: $48.17 +$0.55

DJIA: 30,458 +55

NASDAQ: 12,878 +74

S&P 500: 3741 +6

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on December 29th, 2020 9:44 AM

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