September 29th, 2021 9:39 AM by Richard Sardella MLO.100007700/NMLS 233568
The 10 yr. began the day at 1.50% at 6:30 am ET this morning, MBS prices +20 bps from yesterday. By 8:30 am the 10 edged up to 1.52% and MBS prices traded +14 bps. Yesterday the 10 yr. yield after the huge and rapid increase hit our technical support at 1.55%, it held as we expected; it is a very near term support and no indication the run-up in interest rates has ended. This morning the stick indexes in pre-opening trade were better after the DJIA dropped 569, NASDAQ -423 yesterday; at 7 am the DJIA +150 but by 8:30 am +70. The interest rates and equity markets both need consolidation after the recent weaknesses.
Weekly MBA mortgage applications this morning, not a sift as we thought they would be given the rapid increase in mortgage rates. Total apps declined 1.1% from the prior week’s 4.9% improvement; purchase apps -1.0%, re-finance apps -1.0% from +7.0% the week before.
Senate Democrats are working on a vote today on a stopgap funding bill that would avert a government shutdown, while Republicans resist efforts to raise the debt ceiling. Both most Democrats and all Republicans are wanting to pass the $1 trillion infrastructure bill that will increase infrastructure spending by $550B but there is no common ground between the parties over the Biden $3.5trillion tax and social spending bill.
After months hearing from the Fed and other central banks that any near term inflation spike would be temporary, it has now become clear that inflation pressures are not going to be short-lived. The recent concern that is unfolding is the anticipated increase in energy prices expected this winter, energy analysts forecasting potential shortages in parts of the Northern Hemisphere this winter driving heating costs higher. Yesterday Brent crude oil exceeded $80.00/barrel. Supply chain disruptions are not improving and in some cases getting worse. The scary word, stagflation is being heard again in economic circles.
Today at 11:45 am the European Central Bank policy panel discussion that features ECB President Christine Lagarde, Federal Reserve Chair Jerome Powell, Bank of Japan Governor Haruhiko Kuroda and Bank of England Governor Andrew Bailey. Investors will be looking for reassurance that fears over a stagflation-like economic climate are unfounded. Through the day Philadelphia Fed President Patrick Harker, San Francisco Fed President Mary Daly and Atlanta Fed President Raphael Bostic speak at various events today.
At 9:30 am the DJIA opened +114, NASDAQ +77, S&P +16. 10 yr. at 9:30 1.52% -2 bps. FNMA 2.5 30 yr. coupon at 9:30 am +19 bps and +14 bps from 9:30 am yesterday; the 3.0 coupon +11 bps and +12 bps from 9:30 am yesterday.
At 10 am August pending home sales index expected +0.9% from -1.8% in July. Sales reported +8.1%, the index increased to 119.5 from 110.5 in July.
So far, the 10 yr. is holding its technical support at 1.55% as we thought it would. Too much in too short of time usually ends in some kind of consolidation. This isn’t likely the end of increasing rates, just a pause to digest the implications of the recent increases as being necessary based on the changing fundamentals about inflation and economic growth. The next key data is on Friday when personal income and expenditures are reported; within the report the PCE inflation gauge, the Fed’s admitted main monthly focus. Income expected +0.3%, expenditures +0.6%; monthly PCE +0.3% from +0.4% in July, yr./yr. +4.2% unchanged from July. Core PCE +0.2% down from 0.3% in July, yr./yr. +3.6% unch from July.
PRICES @ 10 AM
10 yr. note: 1.50% -4 bp
5 yr. note: 0.99% -3 bp
2 Yr. note: 0.54% -2 bp
30 yr. bond: 2.05% -4 bp
Libor Rates: 1 mo. 0.084%; 3 mo. 0.131%; 6 mo. 0.157%; 1 yr. 0.238% (9/28/21)
30 yr. FNMA 3.0: @9:30 am 104.50 +11 bp (+12 bp from 9:30 am yesterday)
30 yr. FNMA 2.5: @9:30 am 103.02 +19 bp (+14 bp from 9:30 am yesterday)
30 yr. GNMA 2.5: @9:30 am 102.83 +16 bp (+16 bp from 9:30 am yesterday)
Dollar/Yuan: $6.4670 +$0.0067
Dollar/Yen: 111.54 +0.04 yen
Dollar/Euro: $1.1642 -$0.0043
Dollar Index: 94.07 +0.31
Gold: $1737.40 -$0.10
Bitcoin: 41,997 +407
Crude Oil: $74.63 -$0.66
DJIA: 34,512 +212
NASDAQ: 14,673 +126
S&P 500: 4379 +27
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.