November 13th, 2020 11:17 AM by Richard Sardella MLO.100007700/NMLS 233568
Stock indexes traded higher in pre-opening trading this morning, the MBS price a little better at 8:30 am ET with the 10 yr. note unchanged after the nice decline yesterday. Yesterday the 10 yr. dropped 10 bps, and MBS prices ended +38 bps.
At 8:30 am ET October PPI; +0.3% on thoughts of 0.2%, yr./yr. PPI +0.5% higher than 0.4% expected. The Core PPI at 0.1% was lower than 0.2% estimates, yr./yr. +1.1% also better than 1.2% forecasts. The report is about what economists were thinking. There was no initial reaction to the report.
The virus is increasing at rates much higher than back in March and April. The outlook, according to experts, is for rising infections. Wide state shutdowns are increasing, and the Biden team is beginning to lean toward a possible nationwide closure again. Biden is on record many times, he would listen to the scientists, and if a shutdown was recommended, then he would do it. At this point, although the spread is growing and in some areas hospitals are over-crowded, there is no momentum to close down. The good news is now we have therapeutics, and the death toll for people under 50 is only 0.5% of those infected. It is serious, but a national shutdown now will crush the economic outlook. Wednesday Jerome Powell and the ECB continued to warn the outlook is becoming cloudy as the virus expands. Trump has two months left to make the decisions. Markets are equally confident that there won’t be a shutdown, the equity markets climbing and interest rates steady. Presently, although the spread continues to increase, no countrywide closures are likely. Closing down the economy again as the economy is continuing to improve would drive the economy back into recession and would likely last longer than the first one in March/April. The most serious impact now is many states are closing down in-person schools, which isn’t good for children and parents that have to work.
At 9:30 am ET, the DJIA opened +230 after slipping 317 yesterday, NASDAQ opened +82, S&P +26. 10 yr. at 9:30 am unchanged at 0.88%. FNMA 2.0 30- yr. coupon at 9:30 am+3 bps from yesterday and +19 bps from 9:30 am yesterday.
At 10:00 am ET, the October mid-month U. of Michigan consumer sentiment index was expected at 82.0 from 81.8 in September, the index dropped to 77.0.
Technically, the 10 yr. is testing its 20-day average as it flirts with the support at 0.90%. They are no longer overbought based on the 9-day RSI. Today will likely be somewhat quiet with the weekend ahead and worries about what states will do about increasing virus infection shutdowns.
PRICES @ 10:00 AM ET
10 yr. note: 0.90% +1 bp
5 yr. note: 0.39% unch
2 Yr. note: 0.17% unch
30 yr. bond: 1.64% unch
Libor Rates: 1 mo. 0.140%; 3 mo. 0.221%; 6 mo. 0.251%; 1 yr. 0.340% (11/12/20)
30 yr. FNMA 2.0: @9:30 103.33 +3 bp (+19 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.33 +2 bp (+19 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.30 +2 b p (+7 bp from 9:30 yesterday)
Dollar/Yuan: $6.6051 -$0.0079
Dollar/Yen: 104.77 -0.36 yen
Dollar/Euro: $1.1820 +$0.0015
Dollar Index: 92.80 -0.16
Gold: $1891.70 +$18.40
Crude Oil: $40.57 -$0.55
DJIA: 29,338 +258
NASDAQ: 11,793 +84
S&P 500: 3564 +27
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.