September 1st, 2021 9:30 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday MBS prices fell, positioning for this morning’s August ADP private jobs reported at 8:30 am ET. Last night at about 11 pm the 10 yr. note yield traded at 1.33% +2 bps from the US close at 1.31%. ADP jobs increased 374K jobs compared to estimates of 500K. We noted yesterday how ADP and the BLS jobs reports deviate between the two and it is evident this morning, the consensus estimates for Friday’s official BLS report is 693K for private jobs and +740K for all non-farm jobs. Does the ADP report now lower the forecasts from BLS? The initial reaction to ADP put a little bid in MBS prices, by 8:45 am prices were up 5 bps from yesterday.
The biggest increase in hiring last month took place in leisure and hospitality. Hotels, restaurants, entertainment venues and the like added 201,000 jobs. Jobs in education and health care rose by 59,000. And construction companies increased payrolls by 30,000. Mid-sized businesses created 149,000 new jobs, followed by 130,000 at large companies. Small businesses, which have been hurt the most by the pandemic, only added 86,000 new jobs.
MBA reported last week’s mortgage applications; the composite declined 2.4%, purchase apps +1.0% while re-finances declined 4.0%.
The Biden administration is considering regulatory changes to help improve the housing shortage that is showing no signs of easing. Fannie and Freddie would be allowed to invest more of their resources into rental housing by boosting an existing regulatory cap on their investments in apartment projects supported by the Low-Income Housing Tax Credit. A second would expand an existing competitive grant program for Community Development Financial Institutions, to encourage affordable housing production. Yet another would increase the financing available for manufactured homes, which are built in factories rather than on a lot. They typically cost much less than homes built on sites and are often occupied by lower-income residents. Nothing has been finalized though.
At 9:30 am the DJIA opened -11, NASDAQ +64, S&P +8. 10 yr. at 9:30 am 1.30% -1 bp. FNMA 2.0 30 yr. coupon at 9:30 +9 bps from yesterday and -6 bps from 9:30 yesterday; the 2.5 coupon at 9:30 am +6 bps and -3 bps from 9:30 am yesterday.
At 10 am August ISM manufacturing index; the estimates were the index at 59.0 from 59.5 in July. The index reported at 59.9. This figure indicates expansion in the overall economy for the 15th month in a row after contraction in April 2020. The New Orders Index registered 66.7 percent, increasing 1.8 percentage points from the July reading of 64.9 percent. The Production Index registered 60 percent, an increase of 1.6 percentage points compared to the July reading of 58.4 percent. The Prices Index registered 79.4 percent, down 6.3 percentage points compared to the July figure of 85.7 percent.
July construction spending was expected to have increased +0.3% from +0.1% in June; spending as reported +0.3%.
Next week the extra unemployment payment benefits are set to expire. Several rounds of federal pandemic aid boosted the amount of unemployment payments, most recently by $300 a week, and extended them for as long as 18 months. Will the end drive more workers back? Data shows that the 25 states that cut those benefits early to push workers back didn’t work; the comparison between the states that cut the extra pay and those that didn’t saw little differences in employment.
PRICES @ 10:10 AM ET
10 yr. note: 1.30% -1 bp
5 yr. note: 0.76% -1 bp
2 Yr. note: 0.20-% unch
30 yr. bond: 1.91% -2 bp
Libor Rates: 1 mo. 0.082%; 3 mo. 0.119%; 6 mo. 0.149%; 1 yr. 0.228% (8/31/21)
30 yr. FNMA 2.0: @9:30 101.42 +9 bp (-6 bp from 9:30 am yesterday)
30 yr. FNMA 2.5: @9:30 103.91 +6 bp (-3 bp from 9:30 am yesterday)
30 yr. GNMA 2.5: @9:30 103.42 +6 bp (-2 bp from 9:30 am yesterday)
Dollar/Yuan: $6.4627 +$0.0020
Dollar/Yen: 109.93 -0.07 yen
Dollar/Euro: $1.1847 +$0.0039
Dollar Index: 92.43 -0.20
Gold: $1818.60 +$0.50
Bitcoin: 47,559 +563
Crude Oil: $67.44.-$1.06
DJIA: 35,341 -19
NASDAQ: 15,336 +77
S&P 500: 4529 +7
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.