CHM Blog

A nice small rally yesterday with the stock market taking another hit in what some are saying it is overdue for a 10% correction. The 10 yr. 1.27% -1 bp and MBS prices +5 bps from yesterday.

Weekly MBA mortgage applications last week; the composite +0.3%, purchase apps +8.0% but re-finance apps declined 0.3%.

At 8:30 am August import and export prices. Import prices expected +0.3% declined 0.3%, yr./yr. expected +9.6% increased 9.0%. Export prices expected +0.4% increased 0.4%; yr./yr. estimates +17.0%, as reported +16.8%. No reaction to the report as usual.

At 9:15 am August industrial production and factory use; production expected +0.5% from +0.9% in July, as reported

At 9:30 am the DJIA opened -15, NASDAQ +38, S&P +7. 10 yr. 1.28% -1 bp. FNMA 2.0 coupon +2 bps from yesterday and +6 bps from 9:30 am yesterday; the 2.5 +2 bps and +8 bp from 9:30 am yesterday.

The $3.5 trillion spending bill is moving through the House and Senate but as noted yesterday the plan isn’t going to go unchanged from what many in the House are proposing. In the Senate Centrist Democrats are raising concerns over Democratic leaders’ plans to assemble a package of $3.5 trillion in spending and tax cuts, even if offset by other sources of revenue and savings. Because Democrats cannot afford to lose a single vote from their own caucus in the evenly-split Senate, that means that overall spending level will likely have to come down, either by excluding or shortening the length of some proposed programs. In the House, committees are drafting and voting on Democratic-written bills that total roughly $4.5 trillion over a decade. In the House, Democrats can lose no more than three of their own votes on legislation opposed by all Republicans. Don’t expect any bill to be voted on until later this year.

The 10 trading under 1.30%, bullish technically but to keep the buying going it will depend on how equity markets trade. Hedging the possible correction in equities that has grown within markets recently is supporting the minor decline in rates. This morning stock indexes starting generally unchanged and the 10 and MBS prices unchanged from yesterday when the DJIA dropped 292 points. Next week the FOPMC meeting that is expected to unveil the Fed’s plan to begin selling its balance sheet, the $120B a month buying treasuries and MBSs. Likely the taper will be slow, $10B a month selling treasuries and $5B a month of MBSs. The Fed wants to stop buying to allow a possible interest rate increase next year if inflation were to continue increasing.

Today the rate markets will track the stock indexes, if the indexes are pressured interest rates will edge lower. That said, with the FOMC meeting next Tuesday and Wednesday it’s not likely interest rate markets will improve much.

PRICES @ 10:00 AM ET

10 yr. note: 1.29% +1 bp

5 yr. note: 0.80% +2 bp

2 Yr. note: 0.21% unch

30 yr. bond: 1.86% unch

Libor Rates: 1 mo. 0.084%; 3 mo. 0.118%; 6 mo. 0.147%; 1 yr. 0.222% (9/14/21)

30 yr. FNMA 2.0: @9:30 am 101.39 +2 bp (+6 bp from 9:30 am yesterday)

30 yr. FNMA 2.5: @9:30 am 103.94 +2 bp (+8 bp from 9:30 am yesterday)

30 yr. GNMA 2.5: @9:30 am 103.41 +3 bp (+2 bp from 9:30 am yesterday)

Dollar/Yuan: $6.4324 -$0.007

Dollar/Yen: 109.30 -0.39 yen

Dollar/Euro: $1.1817 +$0.0013

Dollar Index: 92.52 -0.11

Gold: $1799.70 -$7.40

Bitcoin: 47,705 1.174

Crude Oil: $72.51 +$2.05

DJIA: 34,687 +105

NASDAQ: 15,015 -19

S&P 500: 4452 +9 bp

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.