CHM Blog

Daily Market Analysis October 8, 2021

October 8th, 2021 9:20 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

At 8:30 am ET the Sept employment report, long anticipated, the initial knee jerk reaction sent the 10 yr. briefly to 1.60%, lasted five minutes before the note dropped back to unchanged; MBS prices down 9 bps rebounded to +3 bps. The initial reaction to Sept employment was slower job growth; non-farm jobs were expected +475K, as reported +194K, private jobs thought to be +445K up just 317K and August private jobs revised from 243K to 332K. those numbers caused the selling; the reversal came once traders focused on the unemployment rate that was expected at 5.1% from 5.2% in August; the unemployment rate fell to 4.8%. Sept average hourly earnings forecast to be +0.4% increased to +0.6%; August earnings originally reported +0.6% revised lower to +0.4%. On a yr./yr. basis average hourly earnings expected at +4.6%, as reported +4.6% but August yr./yr. originally 4.3% revised lower to 4.0%.

Consecutive months of sluggish job growth indicate a tug of war between employers -- starved for workers to meet demand -- and candidates who have been slow to return to the workforce. Nonetheless, school reopening’s and the end of expanded federal unemployment benefits should lead to a pickup in hiring in coming months at a time when companies are boosting pay. The labor force participation rate -- a measure of the share of Americans who are employed or looking for work -- fell by 0.1 percentage point to 61.6%. The increasing number of government and private company mandates to get vaccinated may also be effecting job growth according to some economists.

Not unusual with monthly employment reports; there is something for everyone’s point of view. On the one side less job growth reported, on another side inflation is increasing in the job market based on the increase in annual hourly earnings, on yet another side the unemployment rate dropped dramatically from +5.2% in August to 4.8%. By 9 am interest rates settled down and the 10 yr. note unchanged at 1.57% with MBS prices also generally unchanged from yesterday. Traders in interest rate markets got a balance between good and not so good news. The job growth in Sept, the lowest monthly increase this year, earnings increased, the unemployment rate declined. The mixed bag blamed on the Delta virus and would-be workers resisting going back to work.

At 9:30 am the DJIA opened +30, NASDAQ +41, S&P +10. FNMA 2.5 30 yr. coupon -2 bps and -8 bps from 9:30 am yesterday; so far this morning interest rate markets hugging unchanged readings. The 10 at 9:30 am bumped up to 1.59% +2 bps.

The Senate voted along party lines yesterday to raise the U.S. borrowing limit into December, after Democrats struck a short-term agreement with Republican leaders that averted a looming default for now but sets up another showdown within months. 11 Republicans joined all 50 Democrats in a vote to break the 60-vote filibuster threshold and proceed to final passage of the measure, which cleared the Senate 50 to 48, with two Republican absences. Now the bill goes to the House where it is expected to pass; Biden saying he would sign the bill. Next deadline Dec 3rd.

There was something for every point of views in the employment data, so far by 10 am no significant change in rates. The rest of the day in the rate markets will be driven by how equity markets perform; a significant drop in the indexes will support rate increases, while the opposite also applies. The wider bias for rates is that they will work higher. Today’s focus on the employment report but inflation continues to increase, a serious drag on long term interest rates; crude oil this morning touching $80.00/barrel, the highest in over a year.

PRICES @ 10 AM ET

10 yr. note: 1.60% +3 bp

5 yr. note: 1.04% +2 bp

2 Yr. note: 0.31% unch

30 yr. bond: 2.17% +3 bp

Libor Rates: 1 mo. 0.086%; 3 mo. 0.123%; 6 mo. 0.156%; 1 yr. 0.242% (10/7/21)

30 yr. FNMA 3.0: @9:30 am 104.38 -3 bp (-8 bp from 9:30 am yesterday)

30 yr. FNMA 2.5: @9:30 am 102.86 -2 bp (-8 bp from 9:30 am yesterday)

30 yr. GNMA 2.5: @9:30 am 102.73 +5 bp (+7 bp from 9:30 am yesterday)

Dollar/Yuan: $6.4442 -$0.0025 (China re-opened)

Dollar/Yen: 111.87 +0.23 yen

Dollar/Euro: $1.1563 +$0.0010

Dollar Index: 94.14 -0.07

Gold: $1770.10 +$10.90

Bitcoin: 54,337 +133

Crude Oil: $79.65 +$1.35

DJIA: 34,801 +46

NASDAQ: 14,660 +6 bp

S&P 500: 4408 +8

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on October 8th, 2021 9:20 AM

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