October 15th, 2020 9:11 AM by Richard Sardella MLO.100007700/NMLS 233568
Stock indexes diving this morning on an increasing belief that there'll be no stimulus before the election. The 10 yr. note yield at 9:00 am ET, 0.70% -3 bps; after testing its upside support at 0.80%, the yield is down 10 bps and comfortably back within its range that goes back to April.
Washington fell short in delivering more stimulus before the election. Neither party is willing to move and get a deal. Some Republicans are not willing to increase stimulus, mostly because the Democrat plan provides to state and local governments with more money than Republicans think is reasonable. Senate Majority Leader Mitch McConnell and many of his fellow Republicans resisted any stimulus of much more than $1 trillion, and especially the massive state and local aid sought by Democrats. Mnuchin said that "reality" is getting in the way. The Treasury chief said this morning the administration is "not giving up" on a deal, although he's planning to head to the Middle East next week. Mnuchin also commented, "We need to get money to the American public now, the people that are most hurting," he said on CNBC this morning after the latest weekly jobless claims figure showed an unexpected deterioration.
Stocks were lower all night. At 8:30 am ET, weekly jobless claims were higher than expected (845K), as released claims increased to 898K, up 53K from the prior week. On the 8:30 am release, the indexes took another dip lower. The October Philly Fed business index thought to be at 14.5 from 15.0 in Sept; the index jumped to 32.2, a nice increase but the history of this report is volatile, swinging back and forth, at times big changes.
Finally at 8:30 am ET, Sept import and export prices; imports were expected +0.3%, as reported +0.3%; yr./yr. -1.1% as expected. Export prices were expected +0.4%, increased 0.6%; yr./yr. expected -2.2%, was -1.8%.
At 9:30 am ET, the DJIA opened -280, NASDAQ -146, S&P -38. The 10 yr. at 9:30 am 0.71% -2 bps. FNMA 2.0 30 yr. coupon at 9:30 am 103.22 +2 bps, from 9:30 am yesterday +11 bps; FNMA 2.5 coupon 104.48 -2 bp and +7 bps from 9:30 am yesterday.
Trump and Biden are holding town hall meetings tonight, after canceling the virtual debate. Tonight they share airtime, twin events, in which each candidate will field questions from voters. They'll will both take place at 8 pm ET, with Trump on NBC and Biden on ABC. According to the US Elections Project at the University of Florida, 15 million Americans have cast ballots. North Carolina, a highly competitive state, begins more than two weeks of in-person early voting today. Trump's town hall will take place in Miami, while Biden will appear in Philadelphia. The third presidential debate is scheduled for Oct. 22 in Nashville, Tennessee.
With mortgage rates expected to remain flat through the end of 2021, Freddie Mac has raised its mortgage origination forecast for this year to nearly $3.6 trillion. "Even as the economy faces challenges from the coronavirus pandemic, the housing market has been showing strength," Freddie Mac Chief Economist Sam Khater said in a press release. "Refinance activity is solid and homebuyer demand continues, resulting in increased sales and an acceleration in house price growth." Freddie Mac issues its forecasts every quarter. In its last set of projections in June, the GSE predicted $2.9 trillion in volume for this year. Its rate forecast in the June release was higher, at 3.3% for the rest of this year and 3.2% for all of next year, now the view is 3.0%. Fannie Mae, in its September forecast, predicted $3.9 trillion in mortgage originations this year and $2.6 trillion in 2021.
Meanwhile, in September, the Mortgage Bankers Association predicted $3.1 trillion this year and $2.2 trillion next year. Unlike Fannie and Freddie, the MBA's Chief Economist Mike Fratanoni expected rates to rise from now through the fourth quarter of next year. When it comes to purchasing activity, Freddie Mac sees a slight increase in volume for 2021 compared with this year. For 2020, Freddie Mac expects $1.41 trillion in purchase originations, while it projects $1.44 trillion during 2021.
It's not likely that we'll see much movement in interest rate markets until Nov. 3. Then we may see a lot of volatility unless the election results are definitive. Still, any squabbles are likely to last at least a month before the election is decided.
PRICES @ 10:00 AM
10 yr. note: 0.71% -2 bp
5 yr. note: 0.30% unch
2 Yr. note: 0.14% unch
30 yr. bond: 1.49% -2 bp
Libor Rates: 1 mo. 0.145%; 3 mo. 0.230%; 6 mo. 0.253%; 1 yr. 0.344% (10/14/20)
30 yr. FNMA 2.0: @9:30 103.22 +2 bp (+11 bp from 9:30 yesterday)
20 yr. FNMA 2.5: @9:30 104.48 -2 bp (+7 bp from 9:03 yesterday)
30 yr. GNMA 2.5: @9:30 104.19 -2 bp (+10 bp from 9:30 yesterday)
Dollar/Yuan: $6.7240 +$.0089
Dollar/Yen: 105.24 +0.08 yen
Dollar/Euro: $1.1704 -$0.0044
Dollar Index: 93.81 +0.43
Gold: $1903.70 -$3.60
Crude Oil: $39.77 -$1.27
DJIA: 28,335 -178
NASDAQ: 11,647 -122
S&P 500: 3463 -25
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.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.