July 6th, 2021 9:40 AM by Richard Sardella MLO.100007700/NMLS 233568
This morning, after a long holiday, interest rate markets continue to edge lower. This morning the 10 yr. inched below its technical resistance at 1.44%, trading at 1.43% -1 bp from Last Friday. MBS prices at 8:30 am ET +8 bps from Friday.
This week has a dearth of economic data; June ISM non-manufacturing index at 10:00 am ET this morning, weekly claims, and the FOMC minutes are the big ones.
Prices are continuing to increase, yet the Fed is standing firm that prices that are increasing are transitory. The Fed has been beating that drum now for six months. In the meantime, inflation is increasing more than what the Fed has been estimating for months. This morning it is the crude oil market, with discussions breaking down crude is at the high of the year; from $40.00 in January, was at $77.00 the highest in six years, backing down somewhat this morning. Economists are not infallible and do make errors in forward outlooks, is this one of those? Debates over potential longer inflation forecasts continue within the Fed and Wall Street. So far, inflation increases have not been influential in the bond market, the 10 yr. note yield is declining, and MBS prices are increasing. Last week the 10 yr. note yield fell 9 bps, and MBS prices +36 bps. Federal Reserve Chair Jerome Powell and colleagues have begun debating when and how to slow their asset-purchase program while the People’s Bank of China is already curbing credit growth. Brazil, Mexico, Turkey, the Czech Republic, and Russia have hiked interest rates, and others are starting to publicly detail how they may pull back support.
Not really new news, but rents are going higher quickly; with home sale prices climbing rapidly, it naturally follows that rents would increase. The median national rent climbed 9.2% in the first half of 2021, according to Apartment List. While part of the increase reflects a bounce-back in prices that dropped earlier in the pandemic, the real-estate firm says rents are now higher than if they had stayed on their pre-Covid track. Surveys by the New York Fed and Fannie Mae suggest renters are braced for further hikes of 7% to 10% in the coming year. That means a sustained run-up in rents could represent a bigger challenge to the Federal Reserve’s view –- shared by most investors –- that the current spike in inflation will prove transitory. House prices jumped the most in more than 30 years in the 12 months through April, +15% according to Case/Shiller. Wall Street, which historically hasn’t paid much attention to the rental sector, has noticed. Blackstone Group Inc. and KKR & Co. are among firms plowing in cash. Online real-estate platform Fundrise recently acquired a 121-home development near San Antonio, Texas. KKR is making a huge bet on rental housing but holding their plans close to the vest; not much is known of their plans.
At 9:30 am ET, the DJIA opened -10, NASDAQ +35, S&P +2. 10 yr. at 9:30 am 1.40% -4 bps. FNMA 2.5 30 yr. coupon at 9:30 am +9 bps from last Friday and +9 bps from 9:30 Friday.
At 10:00 am June ISM non-manufacturing index, expected 63.5, as reported 60.1.
The 10 yr. broke its month-long resistance at 1.44%, the bullish bias is increasing even with inflation still a SWAG with the Fed not concerned, but data measuring inflation is increasing. Have to respect the market’s change rather than the inflation debates that continue in the media and data itself.
PRICES @ 10:00 AM ET
10 yr. note: 1.38% -6 bp
5 yr. note: 0.81% -5 bp
2 Yr. note: 0.24% unch
30 yr. bond: 1.99% -5 bp
Libor Rates: 1 mo. 0.104%; 3 mo. 0.138%; 6 mo. 0.162%; 1 yr. 0.241% (7/5/21)
30 yr. FNMA 2.0: @9:30 101.28 +13 bp (+19 bp from 9:30 Friday)
30 yr. FNMA 2.5: @9:30 103.56 +9 bp (+9 bp from 9:30 Friday) (@10:00 am +17 bp)
30 yr. GNMA 2.5: @9:30 103.27 unch (+7 bp from 9:30 Friday)
Dollar/Yuan: $6.4660 +$0.0022
Dollar/Yen: 110.75 -0.22 yen
Dollar/Euro: $1.1827 -$0.0037
Dollar Index: 92.46 +0.25
Gold: $1810.80 +$27.50
Bitcoin: 34,132 -6.85
Crude Oil: $74.35 -$0.79
DJIA: 34,621 -165
NASDAQ: 14,645 +6
S&P 500: 4342 -10
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.