July 8th, 2021 8:52 AM by Richard Sardella MLO.100007700/NMLS 233568
After US markets closed yesterday when the evening markets began, the 10 yr. note immediately crumbled, dropping the yield from 1.32% to 1.24% early this morning. That was the first miss; the second miss, MBS prices are not struggling, prices started this morning stronger (+13 bps at 8:30 am).
The stock market in futures trading this morning down 500 points on the DJIA. The bullish momentum for stocks and higher inflation is blowing up. A week ago, not much outward talk about the potential economic slowdown has grown exponentially, and concerns that inflation will increase are also being rethought. Equity markets technically overbought magnify the selling while the rate markets unwinding the inflation bets that drove the 10 yr. from 1.00% at the beginning of Feb to 1.74% in April, since the high on April 6th the 10 yr. has edged lower until it really capitulated over the last three sessions, and now down almost 70% from the high.
Future economic growth is being questioned amid growing anxiety that the spread of Covid-19 variants will upend those rosy outlooks that had risen to what now may be unattainable at present levels. At the least, investors are nervous about what was considered a given until the last few sessions.
Weekly jobless claims this morning were expected at 353K filings, as released 373K and the prior week revised from 364K to 371K, from the revision claims +2K.
At 9:30 am, the DJIA opened -385 after being down 500+ early this morning, NASDAQ -228, S&P -55. 10 yr. note at 9:30 am 1.31% up from 1.24% at 7:00 am. FNMA 2.5 30 yr. coupon at 9:30 am +13 bp from yesterday, +17 bps from 9:30 am yesterday.
Financial markets, after months of optimism that US growth would return to pre-pandemic levels with unemployment at 3.0%, inflation exceeding 2.0%, the Fed is remaining accommodative, the COVID virus over; it is all being rethought presently. Expect volatility in equity and interest rate markets. The economic rethink is a global issue. China’s authorities signaled they might soon unleash more support for the economy, an unexpected shift in tone that suggests the world’s fastest pandemic recovery may be weaker than it appears. Caution about the strength of the global recovery has been increasing in financial markets, sending the so-called reflation trade that hammered bonds and re-energized value shares into a rapid retreat.
PRICES @ 10:00 AM ET
10 yr. note: 1.29% -3 bp
5 yr. note: 0.74% -4 bp
2 Yr. note: 0.20% -2 bp
30 yr. bond: 1.90% -4 bp
Libor Rates: 1 mo. 0.102%; 3 mo. 0.123%; 5 mo. 0.162%; 1 yr. 0.240% (7/7/21)
30 yr. FNMA 2.0: @9:30 101.67 +11 bp (+20 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 103.86 +13 bp (++17 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 103.44 +6 bp (+16 bp from 9:30 yesterday)
Dollar/Yuan: $6.4880 +$0.0150
Dollar/Yen: 109.64 -0.98 yen
Dollar/Euro: $1.1859 +$0.0067
Dollar Index: 92.32 -0.32
Gold: $1811.30 +$9.20
Bitcoin: 32,469 -2,172
Crude Oil: $71.46 -$0.78
DJIA: 34,254 -427
NASDAQ: 14,447 -218
S&P 500: 4300 -52
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.