November 19th, 2021 10:02 AM by Richard Sardella MLO.100007700/NMLS 233568
As we have been noting there is an increase in concerns that equity markets are tilting toward pulling back, more analysts, economists, fund managers and traders showing outward concern. The result of weakening stock market near term outlook is what we see now, interest rates moving lower as demand increases. The 10 yr. at 8 am ET this morning 1.53% -7 bps; MBS prices +22 bp from yesterday’s close. U.S. stock futures mostly fell, and investors piled into the safety of the dollar and government bonds, after fresh coronavirus restrictions in Europe. In the U.S., the outbreak is rising again, and is shifting to the Midwest, according to the latest data from the Centers for Disease Control and Prevention. Futures tied to the S&P 500 edged down 0.2%, after the index closed at an all-time high yesterday. The outlook for the DJIA among those that focus on equities is being forecast that the market will decline between 10 and 15% when the long-awaited correction gets underway. From our view, a pullback in equity markets will push interest rates lower.
Another market that became excessively bullish, Bitcoin, has declined 20% from its high the last two weeks. Crypto bulls are not discouraged though; it’s largely business as usual with bullish conviction intact -- in contrast to traditional markets where moves on this scale are met with alarm. The largest cryptocurrency slipped 0.5% to around 57,280 in early London this morning, a sixth day of declines.
At 9:30 am the DJIA opened -136 after trading down over 200 in pre-opening futures markets; NASDAQ opened +35, S&P -4. 10 yr. at 9:30 am 1.53% -5 bps. FNMA 2.5 30 yr. coupon at 9:30 am +19 bps and +31 bps from 9:30 am yesterday.
The $2 trillion social spending bill is set for a vote in the House today. The CBO scoring of the bill said it would increase the debt by $367B over 10 yrs. The CBO’s bottom line doesn’t include $207B in revenue that the scorekeeper estimates would result from pouring roughly $80B into tax-enforcement efforts at the Internal Revenue Service. Adding that revenue to the CBO’s other estimates would make the bill’s 10-year deficit about $160B. The Biden administration says its IRS spending would generate $480B, not $207B; in its view, that would tip the bill over to reducing the deficit, and many Democrats appear willing to accept that perspective. Pelosi has the votes to pass the bill; where it may have additional difficulty is when the Senate takes it up, already there will changes in the bill according to Republicans and two Democrats. Treasury Secretary Janet Yellen said the various analyses “make it clear that Build Back Better is fully paid for.”
There isn’t any scheduled data today.
The rest of the day the interest rate markets will be driven by how the equity market trades. If the DJIA turns and improves, expect interest rates to scoot up and MBS prices to decline. Looking ahead, next week is Turkey Week; markets will be closed on Thursday and interest rates will close at 2 pm on Friday. Trade volume will begin thinning out by noon on Wednesday after October personal income and spending and PCE are reported.
PRICES @ 10:00 AM
10 yr. note: 1.53% -5 bp
5 yr. note: 1.17% -5 bp
2 Yr note: 0.45% -5 bp
30 yr. bond: 1.92% -5 bp
Libor Rates: 1 mo. 0.091%; 3 mo. 0.159%; 6 mo. 0.223%; 1 yr. 0.390% (11/18/21)
30 yr. FNMA 3.0: @9:30 am 104.08 +11 bp (+16 bp from 9:30 am yesterday)
30 yr. FNMA 2.5: @9:30 am 102.56 +19 bp (+31 bp from 9:30 am yesterday)
30 yr. GNMA 2.5: @9:30 am 102.48 +13 bp (+26 bp from 9:30 am yesterday)
Dollar/Yuan: $6.3857 unch
Dollar/Yen: 113.92 -0.33 yen
Dollar/Euro: $1.1311 -$0.0063
Dollar Index: 95.84 +0.30
Gold: $1862.90 +$1.50
Bitcoin: 57,961 -132
Crude Oil: $77.14 -$1.87
DJIA: 35,669 -202
NASDAQ: 16,092 +98
S&P 500: 4708 +3
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.