December 8th, 2020 12:05 PM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday, after a couple of days of increasing rates and lower MBS prices, markets recovered a little after the 10 yr. note ran into support just below 1.00% at 0.98%.
This morning the interest rate markets started unchanged, stock indexes slightly lower.
Congress still can't seem to get stimulus money out to help with the declining economy, closed businesses, and job losses. Yesterday it looked like a deal between the parties was about to get done. We doubt Congress will let a stimulus fall apart now, there would be no winners, and everyone would lose; look for a deal within the next three days attached to the spending bill that must pass by Dec 11th, or government will shut off the lights.
This morning, while not considered a first-tier data point, the Nov NFIB (National Federation of Independent Businesses) released its optimism index, expected at 102.5, was 101.4, the same as the index read in October.
Q3 revised productivity, and unit labor costs at 8:30 am ET; productivity expected at +4.9% was +4.6% while unit labor costs expected -8.9% was lower at -6.6%. Productivity increased strongly in the third quarter, but likely overstated as the sharp rebound in output has outpaced employment gains.
The UK has begun vaccinations for the COVID virus; most of the focus this morning remains on the vaccines. When, who will be the first? Will people refuse to get the vaccine? How long will it take to have enough of the vaccines available to all citizens in the US and globally? The FDA concluded in a detailed analysis that the first Covid-19 vaccine being considered for US distribution "met the prescribed success criteria" in a clinical study, suggesting the agency will soon green-light the historic product; releasing two separate analyses, one from its own staff scientists and one from the vaccine's manufacturers, Pfizer and BioNTech. FDA went on to say; Under known risks, the agency said the vaccine carried certain side effects in greater numbers than with patients taking a placebo. The most common were injection site reactions, fatigue, headache, muscle pain, chills, joint pain, and fever. "Data are limited to assess the effect of the vaccine against transmission of [Covid-19] from individuals who are infected despite vaccination."
Chuck Yeager, a folksy, hard-living daredevil who was the first aviator to break the sound barrier and became a symbol of bravery for generations of test pilots, astronauts, and average Americans, died at age 97.
At 9:30 am ET, the DJIA opened -60, NASDAQ -30, S& -11. 10 yr. at 9:30 am 0.91% -1 bp. FNMA 2.0 30 yr. coupon at 9:30 am +5 bps from yesterday and +3 bps from 9:30 yesterday.
At 1:00 pm ET, Treasury will sell $56B of 3 yr. notes.
Fannie thinks home buying sentiment has peaked for now. Employment concerns and the pandemic's many ongoing obstacles for home buying wore down consumer confidence in November. The Home Purchase Sentiment Index dipped to 80 from 81.7 in October and trailed November 2019's level of 91.5. Selling sentiment skewed positive by 26 percentage points in November, a 2 point improvement month-over-month, but a 14 point drop year-over-year. Seller optimism held at 59% from October. Consumer attitude for buying had a net positive score of 22 percentage points. The share of good-time-to-buyers slid to 57%, down 3 points from last month and 10 from last year. Nearly half of borrowers expect mortgage rates to stay the same in the next 12 months, while 43% expect growth and 8% expect them to keep going down. The net share predicting increased rates rose 14 percentage points from October and 7 percentage points from the year before.
The 10 yr. note has moved to 0.98% four times recently, and each time as it approaches 1.00%, sellers lose confidence, and the rate slips back a little; that is happening again yesterday and today. The very strong technical resistance is at 0.85% and should hold on any sustained selling. Mortgages continue to outpace the 10 yr. in terms of declining rates.
PRICES @ 10:00 AM ET
10 yr. note: 0.91% -1 bp
5 yr. note: 0.37% -2 bp
2 Yr. note: 0.14% -1 bp
30 yr. bond: 0.90% -2 bp
Libor Rates: 1 mo. 0.145%; 3 mo. 0.230%; 6 mo. 0.253%; 1 yr. 0.338% (12/7/20)
30 yr. FNMA 2.0: @9:30 103.64 +5 bp (+3 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.83 +3 bp (unch from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.86 -5 bp (unch from 9:30 yesterday)
Dollar/Yuan: $6.5301 unch
Dollar/Yen: 104.11 +0.06 yen
Dollar/Euro: $1.2126 +$0.0017
Dollar Index: 90.83 +0.04
Gold: $1878.90 +$12.90
Crude Oil: $45.70 -$0.06
DJIA: 30,025 -44
NASDAQ: 12,493 -27
S&P 500: 3684 -8
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.