November 12th, 2020 10:08 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday, other than the Treasury and MBS markets, trading continued. The DJIA -23, NASDAQ +233, S&P +27. This morning the 10 yr. is trading better, the yield -4 bps from Tuesday; MBS prices at 8:00 am ET +20 bps with the stock indexes lower.
Weekly jobless claims continuing to decline, last week expected at 737K declined to 709K, down 48K from the previous week. The 4-week average at 755.25 dropped from 788.50 the week before.
October consumer price index expected +0.2% was 0.0%, yr./yr. +1.2% from 1.3% in September. Ex-food and energy (core) 0.0% on estimates of +0.2%, yr./yr. +1.6% on forecasts of +1.7%.
At 9:30 am ET, the DJIA opened -148, NASDAQ +10, S&P -13. 10 yr. at 9:30 am 0.92% -6 bps. FNMA 2.0 30 yr. coupon ay 9:30 am +22 bps from Tuesday’s close and 22bps higher than at 9:30 am Tuesday.
At 1:00 pm ET this afternoon, the treasury will finish the quarterly refunding with $27B of new 30 yr. bonds; on Tuesday, the treasury sold $41B of new 10s. The auction was not well bid.
Equity markets are taking a break so far today, some now thinking maybe the recent improvement that added $6 trillion to global equities may be a little over-extended based on the near term outlook. Increased concerns over the virus spreading is countered by the good news about the vaccine drove stock indexes to new highs, time now to consolidate thoughts and think about the next three months politically. Dems have made it crystal clear about increased taxes, increased regulations, health care, the environment, and increased fiscal spending. No matter how the Georgia election run-off results, there was no mandate based on the totals nationally. Markets like it, any grid-lock keeps the status quo from tipping too far kin either political direction.
Pfizer announced a vaccine over last weekend, now Moderna said Wednesday its study had accumulated more than 53 infections, allowing a preliminary analysis of the shot’s effectiveness to begin. The company didn’t predict how long it could take an independent monitoring committee to analyze the data, but said the company could get the data to the committee within days. The monitoring board will say whether the vaccine is effective, doesn’t work, or that the trial should continue because the results are inconclusive. The bet among top experts is that Moderna’s therapy, which uses a similar mRNA technology to Pfizer’s, will likely prove to be highly effective, perhaps mirroring Pfizer’s announcement earlier this week that its shot appears to be more than 90% effective.
Like clockwork, the 10 yr. note continues to perform as we expect; the rate continues to increase in a technically driven pattern that has been somewhat predictable when seen with the 9-day RSI (see chart). Since the beginning of August, the note has increased in bursts, the yield increases to overbought levels, backs down, then resumes the increase. Treasury rates at the long end (10s and 30s) have been on the rise for two months in what in hindsight is an orderly pattern; note the 9-day RSI compared to the yield.
MBS prices have increased this morning. We are not expecting anymore improvement through the session. The 10 yr. reached its technical bought level earlier this week, and if the pattern holds, the rate will continue to ease to 0.90% before renewing its increase. There will be heavy fundamental and technical support when the note hits 1.00%.
PRICES @ 10:10 AM ET
10 yr. note: 0.92% -6 bp
5 yr. note: 0.41% -4 bp
2 Yr. note: 0.17% -2 bp
30 yr. bond: 1.69% -6 bp
Libor Rates: 1 mo. 0.141%; 3 mo. 0.220%; 6 mo. 0.246%; 1 yr. 0.341% (11/11/20)
30 yr. FNMA 2.0: @9:30 103.14 +22 bp (+22 bp from 9:30 Tuesday)
30 yr. FNMA 2.5: @9:30 104.14 +8 bp (+12 bp from 9:30 Tuesday)
30 yr. GNMA 2.5: @9:30 104.23 +11 bp (+18 bp from 9:30 Tuesday)
Dollar/Yuan: $6.6202 -$0.0118
Dollar/Yen: 105.25 -0.18 yen
Dollar/Euro: $1.1793 +$0.0016
Dollar Index: 92.98 -0.06
Gold: $1875.40 +$13.80
Crude Oil: $41.80 +$0.35
DJIA: 29.289 -105
NASDAQ: 11,834 +48
S&P 500: 3566 -6 bp
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.