October 21st, 2021 9:54 AM by Richard Sardella MLO.100007700/NMLS 233568
A little volatility early this morning; at 8 am ET the 10 yield increased to 1.68% +3 bps from yesterday, by 9 am back to 1.65% unchanged from yesterday; early trading in MBSs generally unchanged from yesterday.
At 8:30 am weekly jobless claims declined 6K from the prior week to 290K,the expectations were for claims at 300K. Improvement but not worth much in terms of market reactions. That’s the fewest people to apply for benefits since March 14, 2020, when the pandemic intensified. Applications for jobless aid, which generally track the pace of layoffs, have fallen steadily from about 900,000 in January. Continuing claims also declining; the number of people receiving jobless aid continues to fall steadily. In the week of Oct. 2, the latest data available, 3.3 million people received unemployment benefits, down from 3.6 million in the previous week.
October Philadelphia Fed business index expected at 25.0 from 30.7 in Sept fell to 23.8. The general conditions index from this business outlook survey is a diffusion index of manufacturing conditions within the Philadelphia Federal Reserve district. This survey, widely followed as an indicator of manufacturing sector trends, is correlated with the ISM manufacturing index and the index of industrial production. It is widely followed but I have never seen much direct market reaction to the data.
Democrats continuing to craft a spending bill that can pass the Senate. Recent comments from Arizona Senator Kyrsten Sinema that she opposes any increase in marginal rates for businesses, high-income individuals or capital gains. Along with Sen Joe Manchin (D., W.Va.), another critical centrist—have also seen raising taxes as an important policy goal on their own, hoping to pare back the 2017 GOP tax law. Both the senators have to join in on whatever bill actually comes to a vote or the bill will fail; no Republican support and a 50/50 split in the Senate leaves no room for defection; their influence will go a long way to shape a bill that can pass. In the House, Democrats have proposed raising the corporate tax rate to 26.5% from 21%, moving the top individual rate to 39.6% from 37% and increasing the top capital-gains rate to 28.8% from 23.8%. Their plan would also add a 3% surtax on income above $5 million.
At 9:30 am the DJIA opened -83, NASDAQ -12, S&P -5. 10 yr. 1.65% unchanged. FNMA 2.5 30 yr. coupon -5 bps and -14 bps from 9:30 am yesterday.
At 10 am Sept existing home sales, expected to have increased to 6.030 mil from 5.880 mil in August; as released sales up 6.29 mil, an increase of 7.0% from August, yr./yr. sales still down 2.3%.
Sept leading economic indicators also reported at 10 am, the estimates were for indicators to have dipped from +0.9% to +0.5%, as released +0.2%.
No relenting on the inflation outlook from Fed leaders, but staff economist Jeremy Rudd has another view. “Mainstream economics is replete with ideas that ‘everyone knows’ to be true, but that are actually arrant nonsense.” That’s not a pundit’s tweet or an academic’s blog post. It’s the opening line of a research paper released by the Vatican of mainstream economics, the Federal Reserve. He balks at the Fed’s transitory inflation outlook. His critique extends to the entirety of the field, accusing economists of routinely making assumptions because they suit their models and theories, not because they fit the facts. We remain convinced inflation is not a short term phenomena unless the time frame is measured in a much longer time horizon, markets beginning to understand the shoe to drop will be wage pressures that are not a transitory event.
At 10 am MBS prices were continuing to slip, down 12 bps and down 7 bps from 9:30 am. No change in our technical outlook that the 10 yr. is destined to increase to 1.74% this year’s high level set in April.
PRICES @ 10 AM ET
10 yr. note: 1.67% +2 bp
5 yr. note: 1.20% +3 bp
2 Yr. note: 0.42% +3 bp
30 yr. bond: 2.14% +1 bp
Libor Rates: 1 mo. 0.085%; 3 mo. 0.128%; 6 mo. 0.170%; 1 yr. 0.297% (10/20/21)
30 yr. FNMA 3.0: @9:30 am 104.28 -5 bp (-6 bp from 9:30 am yesterday)
30 yr. FNMA 2.5: @9:30 am 102.31 -5 bp (-14 bp from 9:30 am yesterday)
30 yr. GNMA 2.5: @9:30 am 102.27 -2 bp (-6 bp from 9:30 am yesterday)
Dollar/Yuan: $6.3946 +$0.0023
Dollar/Yen: 113.88 -0.44 yen
Dollar/Euro: $1.1642 -%0.0009
Dollar Index: 93.58 +0.03
Gold: $1781.70 -$3.20
Bitcoin: 64,516 1,918
Crude Oil: $82.63 -$0.79
DJIA: 35,523 -86
NASDAQ: 15,154 +33
S&P 500: 4534 -2
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.