July 12th, 2021 10:20 AM by Richard Sardella MLO.100007700/NMLS 233568
This morning, the 10 yr started down 1 bp at 1.35% and MBS prices +8 bps from Friday.
This week is the beginning of earnings season with banks reporting. The belief within markets is that earnings will be solid, and many will beat estimates. Earning goes on and on and lasts almost a month. Banks should show strong earnings after passing the stress tests mandated by the Fed. JPMorgan, Goldman Sachs, and other big banks are expected to report large second-quarter gains this week, though trading businesses that thrived during the pandemic are slowing down, and loan demand has been tepid. With sentiment as strong as it is now, any weakness won't go down well with investors and the stock indexes continuing to make new highs about every day. Can corporate profitability justify present valuations?
Today at 11:30 am ET, two Treasury auctions, $58B of 3 yr notes, at 1:00 pm $38B of 10s (9 yr 10 mos.).
This week has a lot of information and Jerome Powell at Congress at both the House and Senate to fulfill his required semi-annual testimony. Key data; CPI, PPI, retail sales, and consumer sentiment index.
Senators are back after two weeks off-President Biden's $4T agenda at stake. Majority Leader Chuck Schumer told Senate Democrats in a letter on Friday that he expects that the chamber will take up both a roughly $1T infrastructure agreement and a resolution setting the bill's parameters encompassing other Democratic priorities in the coming weeks. Democrats are likely to pass the infrastructure bill but are divided over the size and scope of the other, broader bill. Liberals such as Sen. Bernie Sanders have called for as much as $6T in spending in the package. Democrats, including House Speaker Nancy Pelosi, have said they won't support the infrastructure agreement unless the other legislation moves forward. In contrast, some Republicans have said advancing other Democratic priorities could cause them to oppose the infrastructure deal.
At 9:30 am ET, the DJIA opened -89, NASDAQ +44, S&P -2. 10 yr at 9:30 1.35%. FNMA 2.5 30 yr coupon at 9:30 am +6 bps from Friday, and -8 bps from 9:30 am Friday.
Technicals remain slightly bullish but face a key test at 1.30% for the 10 yr note; it broke below it last Thursday but couldn't hold it. This week, with treasury auctions, bank earnings, inflation reads on PPI and CPI, retail sales on Friday, Jerome Powell's testimonies on Wednesday and Thursday, the Senate back dealing with the infrastructure bill it is a steep hill for bond and mortgage markets.
PRICES @ 10:00 AM ET
10 yr. note: 1.36% unch
5 yr. note: 0.79% unch
2 Yr. note: 0.22% unch
30 yr. bond: 1.98% -1 bp
Libor Rates: 1 mo. 0.100%; 3 mo. 0.128%; 6 mo. 0.151%; 1 yr. 2.38% (7/9/21)
30 yr. FNMA 2.0: @9:30 101.48 +8 bp (-18 bp from 9:30 Friday)
30 yr. FNMA 2.5: @9:30 103.70 +6 bp (-8 bp from 9:30 Friday)
30 yr. GNMA 2.5: @9:30 103.30 +3 bp (-8 bp from 9:30 Friday)
Dollar/Yuan: $6.4760 -$0.0029
Dollar/Yen: 110.34 +0.22 yen
Dollar/Euro: $1.1863 -$0.0016
Dollar Index: 92.28 +0.15
Gold: $1798.30 -$12.30
Bitcoin: 33,510 -412
Crude Oil: $73.50 -$1.06
DJIA: 34,947 +76
NASDAQ: 14,689 -13
S&P 500: 4373 +4
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.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.