July 9th, 2021 9:43 AM by Richard Sardella MLO.100007700/NMLS 233568
Equity markets were tagged yesterday, the DJIA at one point -528 before improving to close -260. This morning, the futures trade stock indexes improved (DJIA +246 at 8:30). This morning's rate markets began lower in price (higher yield); the 10 yr. climbed to 1.35% at 7:30 am this morning. The 10 yr. since the June employment report last Friday has dropped from 1.44% to yesterday's low at 1.28%. The Delta virus strain and increasing worries that the economic outlook won't be as strong as had been believed. Global markets are under near-term pressure with the re-thinking about growth slowing that has propelled markets higher through most of this year. Asian markets were selling off this morning; losses in Asia came after the S&P 500 Index closed down 0.9% overnight, adding to the prevailing weak sentiment. A surprise dovish shift in policy from China's central bank on Thursday has added to concerns about the global recovery trade.
The current worries about growth and concerns over the Delta variant are reasons to justify the increased global volatility in equity and interest rate markets. Always have to have a reason, but it looks more like a pause and consolidation driven by the huge increases in the indexes and not an end to the longer-term views held by most of the market. Interest rate declines are also a technical improvement. Currently, inflation fears that drove rates higher since the beginning of the year have ebbed somewhat. Risky asset prices are likely to be limited and short-lived, at least if the Delta variant does not derail the recovery. The economic outlook is positive, especially earnings prospects. Governments are ready to compensate for any delay in reopening, and central banks will remain very dovish, implying a lot of liquidity to buy the dips. JPMorgan Asset Management, BlackRock Inc. and Morgan Stanley Wealth Management -- which together account for some $12T in assets -- are among money managers betting global growth is still on track, with second-quarter earnings season starting next week set to bolster confidence.
The G-20 and central banks are meeting in Venice today; no news out of the meeting yet.
At 9:30 am ET, the DJIA opened +165 after being up 250 earlier; NASDAQ +20, S&P +18. 10 yr. at 9:30 am 1.34% +5 bps. FNMA 2.5 30 yr. coupon at 9:30 am-12 bps from yesterday's close and -8 bps from 9:30 yesterday.
Consumers are borrowing again. Yesterday's consumer credit was expected to have increased by $18.5B, as released credit doubled forecasts at $35.8B and April credit revised from $18.6B to $20.0B. Credit increased at a seasonally adjusted annual rate of 10%. Revolving credit (credit cards) increased at an annual rate of 11.4%, while non-revolving credit increased at an annual rate of 9.5%.
The financial markets (stocks and bonds) are into a consolidation stage after the strong gains this year, and volatility will increase. The 10 yr. note yield spent six months increasing almost every day, the decline from 1.74% to the 1.30% area, the drop now that inflation isn't as much of concern, and the possibility the growth will mitigate somewhat. The potential for the 10 yr. down to 1.20% is possible, although it isn't likely to see that now. We've got to build another base around 1.30%. The lower mortgage rates should motivate re-finances that had slowed with higher rates.
PRICES @ 10:00 AM ET
10 yr. note: 1.34% +5 bp
5 yr. note: 0.78% +4 bp
2 Yr. note: 0.21% +2 bp
30 yr. bond: 1.98% +5 bp
Libor Rates: 1 mo. 0.100%; 3 mo. 0.119%; 6 mo. 0.157%; 1 yr. 0.239% (7/8/21)
30 yr. FNMA 2.0: @9:30 101.66 -17 bp (-1 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 103.78 -12 bp (-8 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 103.38 -6 bp (-67 bp from 9:30 yesterday)
Dollar/Yuan: $6.4797 -$0.0110
Dollar/Yen: 110.16 +0.40 yen
Dollar/Euro: $1.1865 +$0.0018
Dollar Index: 92.25 -0.17
Gold: $1803.80 +$3.60
Bitcoin: 33,407 +484
Crude Oil: $74.20 +$1.26
DJIA: 34,776 +354
NASDAQ: 14,594 +35
S&P 500: 4352 +31
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.