October 30th, 2020 9:02 AM by Richard Sardella MLO.100007700/NMLS 233568
It was a technical bounce that sent long-dated rates up yesterday. After being unable to break through resistance at 0.75%, the 10 yr. increased 6 bps yesterday, and MBS prices slipped from the 9:30 am ET levels yesterday.
This morning in early activity, the 10 yr. at 0.82% -1 bp and MBS prices +6 bps at 8:30 am ET.
Data at 8:30 am ET, better than forecasts; Sept personal income increased 0.9% on estimates of +0.3%, personal spending expected +1.0% increased 1.4%. The PCE in Sept was thought to be +0.2% and matched the forecasts, yr./yr. expectations +1.5% as released +1.4% The core PCE +0.2% as expected but yr./yr. +1.5%, less than +1.7% forecasts. Q3 employment cost index increased 0.5%, less than +0.6% expected; yr./yr. +2.4% down from 2.7% in Q2. Both reports were better than the outlooks, stronger income and spending and inflation based on PCE less than thought.
The three key stock indexes improved a little yesterday after falling hard on Wednesday; this morning, the indexes back under pressure again.
COVID-19 on the increase in the US and Europe; Germany and France shut down most entertainment sectors as new cases jumped. The vaccine is getting closer, according to the drug companies that are working 24/7 to get approvals. The UK's drug regulator is said to have started accelerated reviews of Covid-19 vaccines under development from Pfizer Inc. and AstraZeneca Plc. It would potentially allow British authorities to move ahead of European peers on clearing a vaccine. Moderna recently said it would likely get approval for its vaccine by the middle of next month. German cases exceeded 500,000 after a gain of more than 19,000 through early Friday, confirming a trend that Chancellor Angela Merkel has characterized as a "dramatic situation." US new cases topped 89,000, setting a daily record.
Is the decline in the stock indexes something to be overly concerned about? We don't yet see it as anything more than popping an over-inflated balloon. At its worst, in March, the DJIA was at 18,700, at the end of Sept and three weeks ago at 29,000. Hand-wringing and worries so far have only meted out a normal corrective move. The DJIA is down 1800 from its high but still up 8,000 points from its low on March 23rd. The balloon burst as the virus has increased, and politicians didn't want to do a stimulus bad enough to ignore the economic outlook's real threat. Technically the indexes are presently oversold, likely set up for some bounces and consolidation now.
At 9:30 am ET, the DJIA opened -117 then immediately increased to -32, NASDAQ opened -68, S&P -7 In futures trading at 9:00 am -175. At the start, some volatility. The 10 yr. at 9:30 am 0.84% +1 bp. FNMA 2.0 30 yr. coupon at 9:30 +2 bps from yesterday, but down 12 bps from 9:30 am yesterday.
At 9:45 am ET, the October Chicago purchasing mgrs. index thought to be 58.0 from the outsized 62.4 in Sept; the index held a strong increase at 61.1.
At 10:00 am ET, the final October U. of Michigan consumer sentiment index was thought to be unchanged from mid-month at 81.2, as released 81.8.
PRICES @ 10:05 AM ET
10 yr. note: 0.84% +1 bp
5 yr. note: 0.37% unch
2 Yr. note: 0.14% -1 bp
30 yr. bond: 1.62% +2 bp
Libor Rates: 1 mo. 0.149%; 3 mo. 0.214%; 6 mo. 0.242%; 1 yr. 0.331% (10/29/20)
30 yr. FNMA 2.0: @9:30 103.13 +3 bp (-12 bp from 9:30 yesterday)
20 yr. FNMA 2.5: @9:30 104.14 -2 bp (-8 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.33 -8 bp (+5 bp from 9:30 yesterday)
Dollar/Yuan: $6.6824 -$0.0326
Dollar/Yen: 104.51 -0.11 yen
Dollar/Euro: $1.1686 +$0.0013
Dollar Index: 93.81 -0.15
Gold: $1888.10 +$20.10
Crude Oil: 35.66 -$0.51
DJIA: 26,548 -111
NASDAQ: 11,044 -141
S&P 500: 3291 -19
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.