November 8th, 2021 10:49 AM by Richard Sardella MLO.100007700/NMLS 233568
The day began with stock indexes continuing their climb higher, the 10 yr. note yield after strong buying last Thursday and Friday seeing some early selling, the yield +3 bps. MBS prices increased 41 bps last Friday, the morning down 17 bps to begin the day.
There isn’t any scheduled news today. After the whip-sawing in interest rates last week today may be a day to settle down.
The bets that long term interest rates would continue to increase with inflation not showing any relaxing had driven the long end rates higher, hitting 1.70% three weeks ago were sent spinning last Thursday and Friday. The strong decline of the 10 yr. note, 14 bps lower in the two days and MBS prices increasing 69 bps. Inflation remains a real concern in the longer term outlooks, and the Fed expected to increase the FF rate at least two times late in 2022, so what drove rates lower in what can only be defined and as panic selling of 10s, 30s? Maybe it began when the Bank of England did not increase rates at its meeting when it was widely expected to; maybe the strong employment report on Friday. What can be said given the way rate markets traded late last week is that under it all there were massive leveraged bets that long term rates would move higher with inflation expectations now being extended as the supply chain issues persist and the Fed now believing inflation increases will last longer than it had expected.
A couple of weeks ago those highly leveraged bets of higher long term rates flipped when big money began turning to the short end of the curve and abandoning long term buying; believing that with the Fed ready to increase rates later next year that short rates are a better trade. The fact is, the rates markets were tilted to higher long term rates but the view changed quickly and set off covering the massive tilt toward higher 10 yr. note rates. Even if those big money managers continue their belief long term rates will increase, the leverage employed in those huge trades couldn’t withstand last week’s selling and were forced out. Very near term views may be changing as news continues to reveal China’s economy is slowing and that will filter to the US; again, when your trade is leveraged as it was, it doesn’t take much to shake out excessive bets. We still believe the 10 yr. note yield will increase, the Fed will tighten. Tomorrow Oct PPI and Wednesday CPI will provide more details.
At 9:30 am ET the stock market continued its assent; the DJIA opened +197, NASDAQ +25, S&P +12. 10 yr. at 9:30 am 1.48% +3 bps. FNMA 2.5 30 yr. coupon at 9:30 am -8 bps but 20 bps better than 9:30 am Friday.
PRICES @ 10:00 AM
10 yr. note: 1.48% +3 bp
5 yr. note: 1.08% +3 bp
2 Yr. note: 0.42% +2 bp
30 yr. bond: 1.91% +2 bp
Libor Rates: 1 mo. 0.088%; 3 mo. 0.143%; 6 mo. 0.220%; 1 yr. 0.358% (11/5/21)
30 yr. FNMA 3.0: @9:30 am 104.58 -5 bp (+3 bp from 9:30 am Friday)
30 yr. FNMA 2.5: @9:30 am 103.25 -8 bp (+20 bp from 9:30 am Friday)
30 yr. GNMA 2.5: @9:30 am 102.58 -48 bp (-25 bp from 9:30 am Friday)
Dollar/Yuan: $6.3926 -$0.0063
Dollar/Yen: 113.19 -0.22 yen
Dollar/Euro: $1.1574 +$0.0006
Dollar Index: 94.16 -0.16
Gold: $1824.40 +$7.60
Bitcoin: 65,351 +2,491
Crude Oil: $81.85 +$0.53
DJIA: 36,472 +144
NASDAQ: 15,992 +21
S&P 500: 4703 +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.