July 29th, 2021 10:49 AM by Richard Sardella MLO.100007700/NMLS 233568
The conclusion of the FOMC meeting and Jerome Powell’s conference yesterday didn’t generate any significant movement but did push the 10 yr. note down 1 bp to 1.23%; MBS prices improved nicely on relief that Powell said tapering of MBSs when the time comes won’t be the primary tapering method the Fed will use. The improvements late yesterday afternoon are all gone this morning. At 9:00 am ET the 10 yr. note yield 1.27% +4 bps and FNMA 2.5 30 yr. coupon -10 bps from yesterday’s close. Stock indexes were trading higher in pre-open trading.
At 8:30 pm the 1st look at Q2 GDP (the advance report) was weaker than estimates; expected to show growth at +8.4% from +6.3% in Q1; as released GDP up just 6.5% barely improving from Q1. Personal consumption, the biggest part of the economy, advanced an annualized 11.8%, about what was expected. Looks like the less growth is due to the continuing supply chain issues that kept growth lower than expected. The advance QDP report is usually revised when the preliminary report is released a month from now; some of the third month of the quarter data isn’t complete when the advance report hits.
Weekly jobless claims, expected +385K, as reported +400K down 24K from the prior week. Continuing claims for state benefits climbed for the first time in four weeks, rising to 3.27 million in the week ended July 17. The 4 week average of claims increased from 386.50K to 394.50K.
At 9:30 am the DJIA opened +215, NASDAQ +4, S&P +13. 10 yr. note at 9:30 am 1.27% +4 bps. FNMA 2.0 30 yr. coupon at 9:30 am -12 bps from yesterday’s close and +2 bps from 9:30 am yesterday; FNMA 2.5 30 yr. coupon at 9:30 am -6 bps from yesterday’s close and +5 bps from 9:30 am yesterday.
At 10 am June pending home sales were estimated to be down 0.8% after increasing 8.0% in May; as released sales -1.9%.
At 1 pm Treasury will complete this week’s borrowing with $62B of 7 yr. notes; the 2 and 5 yr. auctions earlier this week were about average compared to the prior 12 auctions.
The infrastructure bill is moving forward. The roughly $1 trillion deal cleared its first procedural hurdle in a 67-32 vote, above the 60 required. Republican negotiators said Wednesday they now had enough confidence in the details of the agreement to allow it to move forward. Completing the infrastructure agreement, which lawmakers and aides said would provide for roughly $550 billion in spending above projected federal levels, is the first step Democrats hope to take toward approving much of President Biden’s agenda on Capitol Hill in the coming months.
Interesting that with substantially lower GDP data this morning the bond and mortgage markets are seeing slight selling. The focus is on the annual personal consumption expenditures that increased 11.8%, not a big miss though, the estimates were for +11.4%. We were expecting interest rates to ebb lower and MBS prices higher given the data this morning; that it isn’t occurring yet implies traders are still digesting the FOMC yesterday. The last seven trading sessions the 10 yr. has been in a very tight range, 1.30% to 1.23% ( daily trading ranges not closings). Our near term bullish bias is holding as long as the 10 yr. note holds below 1.30%.
PRICES @ 10:00 AM ET
10 yr. note: 1.27% +4 bp
5 yr. note: 0.74% +2 bp
2 Yr. note: 0.21% unch
30 yr. bond: 1.91% +3 bp
Libor Rates: 1 mo. 0.092%; 3 mo. 0.128%; 6 mo. 0.154%; 1 yr. 0.237% (7/28/21)
30 yr. FNMA 2.0: @9:30 101.75 -12 bp (+2 bp from 9:30 pm ET yesterday)
30 yr. FNMA 2.5: @9:30 104.02 -6 bp (+5 bp from 9:30 pm ET yesterday)
30 yr. GNMA 2.5: @9:30 103.41 -27 bp (-15 bp from 9:30 pm ET yesterday)
Dollar/Yuan: $6.4597 -$0.0312
Dollar/Yen: 109.75 -0.17 yen
Dollar/Euro: $1.1885 +$0.0041
Dollar Index: 91.98 -0.34
Gold: $1827.30 +$27.60
Bitcoin: 39,890 -177
Crude Oil: $72.89 +$0.50
DJIA: 35,066 +136
NASDAQ: 14,789 +27
S&P 500: 4418 +17
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.