November 10th, 2020 9:18 AM by Richard Sardella MLO.100007700/NMLS 233568
8:00 am ET this morning, the 10yr 0.95% +1 bp from yesterday, MBS prices -3 bps. Stock indexes better, the DJIA +177.
Pfizer's announcement yesterday that it had a vaccine that is almost ready to use sent markets into increased volatility, from interest rates to gold and crude oil and the equity markets. Stock indexes were put in wide ranges, the DJIA at one point +1500, but by the end of the session, half of the improvement eroded with the index closing +835. Still a very strong session. The 10 yr. note increase 12 bps, and MBS prices ended down 66 bps.
Pfizer's announcement was a surprise in terms of expectations about timing; sooner than many were thinking. There are numerous issues now that have to be resolved, not the least of which is the distribution and capability of the shot itself still need to be answered. Getting the vaccine to where it is needed will require initiatives never confronted; the virus has to be kept at -94 degrees until use. "The key question still centers upon time," said Michael Kinch, a drug development expert and associate vice chancellor at Washington University in St. Louis ( my alma mater). "Will time tell us that the protection remains useful for the larger population?" The time the vaccine is available at CVS might be next June, so in the meantime, the virus will continue. It was a wonderful advancement, but it is months away from wide use. Moderna is also racing ahead with its vaccine that people say is about ready for trials.
There are no data points today; markets are not interested even if there were. The focus for the moment is the vaccine. We have warned numerous times over the last three weeks that interest rates were tilting to increasing. All of our analysis implied rates were going to inch higher; we measure what markets are doing rather than what analysts and economists think at the moment. Had no idea, nor did anyone else, that Pfizer would make the announcement yesterday, just that the rate markets had been seeing more selling than buying since the beginning of October.
The Senate remains a key factor. After the run-off voting in Georgia (Jan 5th) tips to Republicans, Biden as President and the House with Pelosi won't have much chance to initiate most of the far-left agenda. The next two years will be more gridlock.
At 9:30 am ET, the DJIA opened +116, NASDAQ -89, S&P -5. 10 yr. at 9:30 am 0.97% +3 bps. FNMA 2.0 30 yr. coupon at 9:30 am -8 bps from yesterday's close, and -36 bps from 9:30 am yesterday.
Early this morning, the October NFIB small business optimism index was unchanged from Sept at 104.0, expectations 104.8.
At 1:00 pm ET, Treasury will auction $41B of new 10 yr. notes.
No change in our technical view; interest rates are bearish. The 10 yr. presently at 0.97% should move a few basis points higher to 1.00%, where we expect another support level that will likely hold for a while and possibly retreat to 0.90%, where the resistance will keep the rate from moving lower.
PRICES @ 10:00 AM ET
10 yr. note: 0.96% +2 bp (0.97% high so far)
5 yr. note: 0.45% +2 bp
2 Yr. note: 0.19% +3 bp
30 yr. bond: 1.75% +3 bp
Libor Rates: 1 mo. 0.129%; 3 mo. 0.205%; 6 mo. 0.241%; 1 yr. 0.332% (11/9/20)
30 yr. FNMA 2.0: @9:30 102.94 -8 bp (-36 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.02 unch (-43 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.05 -6 bp (-11 bp from 9:30 yesterday)
Dollar/Yuan: $6.6209 -$0.0087
Dollar/Yen: 105.33 -0.06 yen
Dollar/Euro: $1.1811 -$0.0004
Dollar Index: 92.81 +0.09
Gold: $1879.40 +$25.00
Crude Oil: $41.02 +$0.73
DJIA: 29,304 +146
NASDAQ: 11,554 -158
S&P 500: 3535 -15
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.