December 7th, 2020 9:20 AM by Richard Sardella MLO.100007700/NMLS 233568
Always at the last minute, that is how Congress works. As note last week, the stimulus bill that has been stalled for months will finally pass and be attached to the government spending bill that must pass by Dec 11th to avoid a government shutdown. Negotiators on a $908B pandemic relief package are planning to unveil more details of their proposal later today, aiming to settle on language that can satisfy enough Republicans and Democrats to secure passage of one final tranche of Covid-19 aid before Congress breaks for the year. Late last week, Pelosi and Schumer accepted, and many Republicans agreed on a bill that has taken six months to get done. The original Democrat plan was $2.4 trillion, the Republican plan $1.1 trillion. The largest disagreement was on state and local funding. Mitch McConnell "will come on board" with the plan, which he emphasized was a short-term boost for a nation still reeling from the pandemic. "This is not a stimulus bill, it's a relief bill," he said on Fox News yesterday. "And it's something for the next three to four months to help those in greatest need."
At 9:30 am ET, the DJIA opened -58, NASDAQ +11, S&P -7. 10 yr. at 9:30 0.94%. FNMA 2.0 30 yr. coupon at 9:30 am +16 bps from Friday and +6 bps from 9:30 Friday.
This week's scheduled economic releases are not major data points, although CPI and PPI are always interesting. With no immediate concerns about inflation, there isn't likely to be any reaction to the two when they hit on Thursday and Friday. The "relief" bill being tendered will be signed by Friday at the latest in combination with the debt ceiling spending bill.
Not much has been said about Brexit in the last three months, but the clock is ticking for the end of the UK in the EU (De 31st). There are still differences that have not been resolved and may not be at the deadline. Trade between the two is the standout issue; investors and banks have long predicted a trade deal would be done so that a no-deal would hit the British pound. Failure is likely to result in increased chaos in mutual trade, financial markets tumbling, and huge economic costs. Last Saturday, there was still no agreement covering annual trade worth nearly $1 trillion, and sterling has fallen against the US dollar since then. In 2016, when the UK resolved to leave the EU, its currency fell a whopping 8% against the dollar.
The changes in opinions about the economic outlook are still mostly talk and wishes; one day optimism, the next fear. With California shutting down in the big cities and virus counts increasing today, it is starting as a fear day that the economy's growth may not be what some believed one week ago. The stock indexes continue to make new all-time highs, interest rates holding bearish outlooks; consumers are beginning to worry as new stimuli have been held up. The presidential race may be over, but almost as critical now is the run-off races in Georgia. If Republicans hold on to the Senate, Biden's team won't get what many on the far left are crying for. If Democrats take control, there won't be much to stop implementing the plans outlined in the campaign. Summing it up, a lot of uncertainty hanging over markets now.
The 10 yr. note will struggle to clear 1.00%; traders, investors, money managers unwilling to buy a 10 yr. with a 1 handle. It has hit and failed at 0.98% four times, each time pulling back as it has o far today. Our outlook remains bearish but with little momentum in either direction.
PRICES @ 10:00 AM ET
10 yr. note: 0.93% -4 bp
5 yr. note: 0.39% -3 bp
2 Yr. note: 0.15% unch
30 yr. bond: 1.69% -5 bp
Libor Rates: 1 mo. 0.151%; 3 mo. 0.225%; 6 mo. 0.255%; 1 yr. 0.336% (12/4/20)
30 yr. FNMA 2.0: @9:30 103.61 +16 bp (+6 bp from 9:30 am ET Friday)
30 yr. FNMA 2.5: @9:30 104.83 +8 bp (+2 bp from 9:30 am ET Friday)
30 yr. GNMA 2.5: @9:30 104.86 +3 bp (+9 bp from 9:30 am ET Friday)
Dollar/Yuan: $6.5342 +$0.0026
Dollar/Yen: 104.02 -0.17 yen
Dollar/Euro: $1.2152 +$0.0032
Dollar Index: 90.64 -0.06
Gold: $1849.90 +$9.90
Crude Oil: $45.68 -$0.58
DJIA: 30,097 -127
NASDAQ: 12,514 +52
S&P 500: 3696 -3
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.