December 9th, 2020 9:31 AM by Richard Sardella MLO.100007700/NMLS 233568
It is the same ole story, not much movement in the interest rate markets and stock indexes slightly better in early trade. No new news, the vaccines, and stimulus are dominant, although not moving interest rates. The 10 yr. is still bearish, in our opinion. You know we have been bearish for two months, rates haven't run higher, but there is little reason either technically or fundamentally for rates to decline as the economy recovers. That said, the economic outlook is ebbing these days with no stimulus and slightly increasing unemployment claims. The 10 yr. is stalled and is trading in a very predictable pattern and unable to trade above 1.00% for the 10 yr. while mortgage rates have benefited from stronger demand the last month.
This morning weekly MBA mortgage applications composite declined 1.2% last week; purchase applications down 5.0% on slim inventories and seasonal factors while refinance applications increased 2.0%.
In the Senate, still no deal on a stimulus package. Friday is the deadline to fund the government, or the government will shut down. Today, according to the present chatter, the House will vote on a stop-gap spending bill to avoid it. A few days ago, the conventional wisdom and expectations were a stimulus package would be attached to the spending bill by Friday. No going to happen as of now, like catching a falling knife. Mnuchin stepped back into it with another proposal after McConnell and Pelosi continued to disagree. Of course, Pelosi and Schumer said in a joint statement that it marked "progress," BUT they said its omission of supplementary jobless benefits was "unacceptable," and backed the continuing bipartisan effort at crafting a compromise. It includes $600 stimulus payments to individuals, which could win support from both Republicans and Democrats, but it pays for that in part through cutting the bipartisan proposal for $300 a week in supplemental unemployment aid. State and local government compensation over the pandemic and liability protection for businesses continues to be a major issue. The Mnuchin offer, which was made to Pelosi late yesterday afternoon, is essentially a joint proposal from the White House, McConnell, and McCarthy (House Republican leader).
When seen from the eyes of the equity market, all's well. The indexes continue to make new historical highs. The interest rate markets are not quite as optimistic; rates are inching up but with trepidation that the economy will slow due to lack of government help. One of these markets is heading to a climax. The day after Christmas, the extended unemployment benefits that have kept 12 million people and their families afloat are scheduled to expire. Then, mere days after that cliff, a national ban on renter evictions from the Centers for Disease Control and Prevention is also set to lapse on New Year's Day.
At 9:30 am ET, the DJIA opened +126, NASDAQ unchanged, S&P +6. 10 yr. 0.94% +2 bps. FNMA 2.0 30 yr. coupon at 9:30 am -6 bps from yesterday's close and -5 bps from 9:30 yesterday.
At 10:00 am ET, two data points that won't have any impact on markets. Oct JOLTS job openings were thought to be 6.40 mil from 6.463 mil in Sept, as released 6.652 mil. October preliminary wholesale inventories expected at +0.9%, as released +1.1%.
At 1:00 pm ET this afternoon, Treasury will sell $38B of 10s, re-opening the issue from November.
Today The US Supreme Court is poised to consider the fate of a lawsuit that could mean billions of dollars for shareholders of Fannie Mae and Freddie Mac. The justices will consider whether investors can challenge the 2012 agreements that let the government collect more than $300 billion in profits from Fannie and Freddie. A ruling in investors' favor would give them a chance to collect a massive settlement. The court is scheduled to rule in the cases by late June. The arguments, both pros and cons, could alter the mortgage industry; higher fees possibly from the agencies. The federal government seized Fannie and Freddie during the 2008 financial crisis and put them into conservatorship under the Federal Housing Finance Agency's control. The companies were eventually injected with $187.5B in US aid. The Wall Street Journal has an editorial today about the continuing issue.
PRICES @ 10:00 AM ET
10 yr. note: 0.95% +3 bp
5 yr. note: 0.41% +2 bp
2 Yr. note: 0.15% unch
30 yr. bond: 1.71% +5 bp
Libor Rates: 1 mo. 0.148%; 3 mo. 0.230%; 6 mo. 0.253%; 1 yr. 0.337% (12/08/20)
30 yr. FNMA 2.0: @9:30 103.59 -6 bp (-5 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.94 unch (+11 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.91 -5 bp (+5 bp from 9:30 yesterday)
Dollar/Yuan: $6.5410 +$0.0078
Dollar/Yen: 104.22 +0.05 yen
Dollar/Euro: $1.2099 -$0.0007
Dollar Index: 90.87 -0.10
Gold: $1858.20 -$16.70
Crude Oil: $46.05 +$0.45
DJIA: 30,205 +21
NASDAQ: 12,589 +7
S&P 500: 3707 +5
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.