October 7th, 2020 8:56 AM by Richard Sardella MLO.100007700/NMLS 233568
10 yr. note yield increased to 0.78% this morning, in early MBS trading prices lower. Stock indexes in pre-open trading recovering from yesterday's hit when Pres. Trump announced the end of negotiations for a stimulus bill until after the election. Trump was on a Tweet barrage overnight, calling for stimulus for airlines and Paycheck Protection Program. He wants a standalone bill removing the "extras" called for in the Pelosi bill for states and local governments and other non-essential spending. On his tweets last night helped erase losses in US stock futures and Japanese shares. Implied volatility on one-month Treasury options jumped nearly 18 percentage points yesterday, its biggest daily increase since March 12, when surging coronavirus cases rocked the market.
Weekly MBA mortgage applications this morning were better last week; the composite +4.6% after -4.8% the prior week; purchase apps -2.0% the same decline the prior week, refinance apps +8.0% reversing -7.0% the prior week.
There are no data points today. At 1:00 pm ET, Treasury will sell $35B of 10 yr. notes. The demand will be interesting given the technical breakout of the 10 yr. from its month's long narrow range.
ECB central bank president Christine Lagarde saying this morning saying the ECB will keep monetary support until the virus crisis is over. "Macroeconomic policies in the euro area have acted forcefully, geared toward protecting productive capacity and jobs," she said in an interview with the Harvard International Review published today. "We should guard against the premature withdrawal of these support measures." There are signs that the euro zone's rebound since coronavirus lockdowns is petering out as virus infections pick up again, forcing governments to impose new restrictions. Germany today reported a surprise drop in industrial production for August. France's statistics agency said yesterday that it expects the nation's economy -- the region's second-largest -- to stagnate in the final three months of the year. Southern European nations are faring even worse as their tourism industries are battered by curbs on travel and hospitality.
At 9:30 am ET, the DJIA opened +321 after failing 376 yesterday, the NASDAQ opened +132, S&P +39. 10 yr. at 9:30 am 0.78% +2 bps. FNMA 2.0 30 yr. coupon at 9:30 -11 bps from yesterday's close and +5 bps from 9:30 am yesterday.
At 2:00 pm ET, FOMC minutes from the meeting three weeks ago.
Tonight we have the Pence and Harris debate. Usually, a VP debate passes with not much interest. Tonight is different, given the age of the two candidates.
Technically our work remains bearish near term for the 10 yr. note. Fundamentally though, it is hard to square that interest rates will increase; the 10 yr. has support at 0.80% and likely to test it. It has come close at 0.79% Tuesday morning.
PRICES @ 10:00 AM ET
10 yr. note: 0.78% +2 bp
5 yr. note: 0.33% +2 bp
2 Yr. note: 0.17% +1 bp
30 yr. bond: 1.58% +1 bp
Libor Rates: 1 mo. 0.139%; 3 mo. 0.229%; 6 mo. 0.239%; 1 yr. 0.3433% (10/6/20)
30 yr. FNMA 2.0: @9:30 103.33 -11 bp (+5 bp from 9:30 yesterday)
30 yr. FNMA:2.5: @9:30 104.73 -5 bp (+1 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.55 -20 bp (+5 bp from 9:30 yesterday)
Dollar/Yuan: $6.7905 unch (closed)
Dollar/Yen: 105.92 +0.29 yen
Dollar/Euro: $1.1773 +$0.0040
Dollar Index: 93.66 -0.03
Gold: $1888.90 -$19.80
Crude Oil: $39.82 -$0.85
DJIA: 28,121 +348
NASDAQ: 11,281 +127
S&P 500: 3398 +37
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.