https://www.facebook.com/204992273347271/

U.S. Capital Group, Los Angeles, CA (2026)

05/06/2024

WILL INTEREST RATES GO DOWN SOON?

“I think it's unlikely that the next policy rate move will be a hike."

Fed Chair Jerome Powell.

The Fed Meeting

Last Wednesday, the highly anticipated Fed Meeting took place and with inflation potentially reaccelerating, there were fears the Fed might have to hike rates again.

The good news, as evidenced by the quote above, Mr. Powell led the financial markets to believe that there will be no more rate hikes and the next move will indeed be a rate cut.

This was soothing to the markets that were worried that Powell would signal a potential rate hike.

"In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective." FOMC Statement May 1, 2024.

While the Fed said a rate hike is not likely, he also shared that a rate cut is not likely to happen in the near-term either. Until the Fed sees inflation move sustainably towards 2.00%, we should not expect a rate cut in the near-term. The bond market was OK with this, and rates improved. Why would rates improve if the Fed signaled no cut just yet?

The markets see the Fed is serious about bringing inflation back down to its goal of 2.00%. This is good for protecting the value of long-term bonds, like mortgages as inflation erodes its value. If inflation continues to moderate, it will help long-term rates moderate as well.

"Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion." FOMC Statement May 1, 2024.

This announcement was also embraced by the markets as the slower pace of supply of bonds coming into the market can help put downward pressure on interest rates.

Treasury to Sell Less Debt in Q2

Possibly having a bigger impact on rates than the Fed, was the Treasury's announcement that they will not need to sell many more bonds in the 2nd quarter to help fund the government.

This was good news for bonds and rates. Why? Bonds hate more bonds. When the Treasury must sell more and more bonds to fund the government it puts downward pressure on prices and upward pressure on yields. So, this was good news for bonds.

4.70%

As the week was drawing to a close, the 10-yr Note remained beneath 4.70%, which has been a ceiling preventing yields from moving higher. Seeing the 10-yr remain beneath this ceiling after the Fed Meeting was a good sign and could start signaling a peak in rates for 2024.

Bottom line: Interest rates are trying to find a peak and getting past the Fed and this Treasury announcement was a nice hurdle as we move deeper into Spring. While we don't expect much more of an uptick in rates, we should also not expect much improvement either.

09/30/2021

Will there be a market correction?

Yesterday in bond markets, the partial rebound saw yields on 10yr treasuries down -2.1bps at 1.517%, marking their first move lower in a week. Sticking with fixed income, UMBS30 2% through 3% coupons ended mixed with the 2.5% coupon lower 1/32nds, while the 2% and 3% coupons closed 0+/32nds and 3+/32nds higher. In relative performance to treasuries, the 2.5% coupon lagged by 1/32nds vs. the curve, while the 2% coupon was 1/32nds better vs. treasuries and the 3% coupon ended 3/32nds tighter vs. treasuries as well. UMBS15 1.5% and 2% coupons closed 3/32nds and 2/32nds higher respectively and outperformed over 2/32nds and 1+/32nds relative to treasuries. For the month-end schedule, the Fed Desk is starting with up to $5.384B in 30-year 2% and 2.5% coupons purchases, with a split of $2.061B in GNIIs and $3.323B in UMBS30s.

Markets are hobbling into quarter end today even if they’ve seen some signs of stabilizing yesterday following the latest selloff. Equities bounced back a bit and bond yields took a breather from their recent relentless climb. The latest moves came amidst relatively dovish and supportive comments from central bank governors at the European Central Bank’s forum yesterday.

The S&P 500 was up +0.16%, but tech stocks continued the sell off with the NASDAQ down -0.24% and the FANG+ index down a greater -0.72%. Much of the tech weakness was driven by falling semiconductor shares (-1.53%), as producers have indicated poor revenue guidance on the heels of the ongoing supply chain issues that are driving chip shortages globally. Outside of tech, US equities broadly did better yesterday with 17 of 24 industry groups gaining, led by utilities (+1.30%), biotech (+1.05%) and food & beverages (+1.00%).

Pending home sales surged 8.1% for the month of August (vs. prior -1.8%), pointing to favorable pricing and additional inventory. Contract signings increased across all four regions, led by gains in the Midwest and South that were the biggest since June 2020.

Yesterday, central bankers Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and BoJ Governor Kuroda all appeared on a policy panel at the ECB’s forum. The central bank heads all maintained that this current inflation spike will relent with Powell saying that it was “really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy -- which is a process that will have a beginning, middle and an end.” ECB President Lagarde shared that sentiment, adding that “we certainly have no reason to believe that these price increases that we are seeing now will not be largely transitory going forward.”

Today’s market backdrop includes the agenda on capitol Hill. Overnight, there have been signs of progress on the government shutdown question, with Majority Leader Schumer saying that senators had reached agreement on a stopgap funding measure that will fund the government through December 3rd, with the Senate set to vote on the measure this morning. However, we’re still no closer to resolving the debt ceiling issue. We could see developments on that throughout the day as the House was set to vote on the infrastructure bill today.

From Elliot Eisenberg, the Bowtie Economist: Debt Debacle - If the debt ceiling isn’t raised, the Fed could ameliorate some of the worst impacts. It could offer to buy unlimited amounts of defaulted Treasuries, preventing panic selling. It could similarly sell some of its Treasury stock that is not in default. The Fed could allow banks to count defaulted Treasuries towards their regulatory capital. It could also allow bank capital ratios to temporarily slip if huge cash demands materialize.

Marks @ 7:30AM
2 Year
0.297%
10 Year
1.525%
UMBS 30 2.0% (Oct)
100-06+
UMBS 15 1.5% (Oct)
100-28

The day ahead
US equities are mixed this morning

Overnight in Asia, equities have seen a mixed performance, with the Nikkei (-0.31%), and the Hang Seng (-0.36%) both losing ground, whereas the Kospi (+0.28%) and the Shanghai Composite (+0.90%) have posted gains. The moves came amidst weak September PMI data from China, which showed the manufacturing PMI fall to 49.6 (vs. 50.0 expected) into contraction territory, marking its lowest level since the height of the Covid crisis in February 2020. European equities are down.

On the macro front
Highlights for today will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly.

In the data front, there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September.

CarMax, Bed Bath & Beyond and McCormick report results before US markets open.

US Capital Group, LLC
NMLS #:1305123

08/17/2021

Will interest rates raise in near future?

Mortgages closed ~2/32nds wider to treasuries on Monday. In another slower trading session, many investors remained on the sidelines with the market rally. Origination flows increased to go over ~$8.0B on the day. At 5:00pm, the FN 30 year 2.0% (Sept) was unchanged (101-11+) and the FN 15 year 1.5% (Sept) was +2/32nds (101-18+) from the prior close. Today, the Fed is scheduled to purchase ~4.3B of UMBS 15 and 30-year securities.

Stocks opened lower Monday following disappointing economic data from China before rallying to close at another record. The DJIA closed +110.02 to 35,625.40, while the S&P 500 was +11.71 to 4,479.71. Investors will be watching today’s town hall with Fed Chair Powell for possible clues regarding tapering of the Fed bond purchase program.

Treasuries finished little changed. At the close, the 2-year was -0.25/32nds (.213) and the 10-year was +4.5/32nds (1.268).

From Elliot Eisenberg, the Bowtie Economist: Reliable Rates - With tapering of the Fed’s monthly purchases of $80 billion in Treasuries and $40 billion in mortgage-backed securities fast approaching, will this raise interest rates? Unlikely, and the primary reason is the federal budget deficit, which was $3.1 trillion in 2020, and will probably be of similar size in 2021, will shrink to $1.5 trillion in 2022. This dramatic supply reduction should more than offset the Fed’s reduced demand.

Market Levels (Sept):

Mon

Close (5pm)

Current

2yr
213
203

10yr

1.26

1.22

FNCL 2.0

101-11+

101-13

FNCI 1.5

101-18+

101-22

The day ahead

US equities are down this morning

Asian equities closed down / European equities are mixed

On the macro front

The economic calendar today includes Retail Sales at 8:30am, followed by Industrial Production at 9:15am.

Fed Chair Jerome Powell participates in a town hall at 1:30 p.m. ET.

NMLS # 1305123

08/04/2021

How's our inflation looking?

On Tuesday, mortgages underperformed for the third straight day as more robust origination flows in the afternoon pushed the basis wider. At the close, UMBS 2.0s ended up ~1.5/32 wider (underperform) to treasuries. Origination flows had another big day yesterday, with volume totaling almost $8.5B for the second consecutive day. This week's volume has lifted the 5-day average to almost $7.7B. The Fed purchased ~$4.6B in 30yr and 15yr conventional MBS yesterday and is expected to purchase up to ~$5.2B in 30yr government and conventional MBS today. At 5:00PM, 30yr UMBS 2.0s in August were -4.5/32 (102-3) and 15yr UMBS 1.5s were -4.5/32 (101-29+).

The MBA’s mortgage applications index from last week was released this morning. The MBA report showed a slowdown in mortgage applications, falling 1.7% after a jump of 7% in the previous week. Both purchases and refis fell by the same 1.7% figure this week.

This morning, treasuries are opening mostly higher. Currently, the 2yr is +.25/32 (0.170) and the 10yr is +5/32 (1.157).

From Elliot Eisenberg, the Bowtie Economist: Simply Services - Inflation, as calculated by the Fed’s favorite measure Core-PCE, was 3.54% Y-o-Y in June, up just marginally from 3.44% in May, suggesting that Peak Inflation is probably here. A key reason inflation isn’t worse, unlike other recessions there’s little pent-up demand for goods but lots for services. However, you can’t eat all the restaurant meals you missed during lockdown. Thus, the current pent-up demand for services is immediate but limited.

Marks:

Marks @ 7:50am

2 Year

0.170

10 Year

1.157

FN30 2.0%

102-3

FN15 1.5%

102-00

The day ahead

US equities are mixed this morning

Asian equities closed mixed / European equities are up

On the macro front

The ADP private employment report posts at 8:15 a.m. ET. The ISM Non-Manufacturing Index, which tracks the US services sector, arrives at 10 a.m. ET.

CVS, Kraft Heinz, Marathon Petroleum, Royal Caribbean and The New York Times report earnings before US markets open. Etsy, Fox Corporation, Hostess Brands, IAC, McKesson, Roku and Uber follow after the close.

US Capital Group
NMLS 1305123

07/26/2021

SPACE TRAVEL

On Friday, mortgages finished the day little changed versus treasuries, but outperformed on the whole for the week. Mortgages traded tighter in the morning as the momentum from Thursday’s trading continued. The performance was helped by lighter origination supply that is typically indicative of a slower summer Friday. Supply increased a bit in the afternoon as customers covered their positions heading into the weekend, which pushed mortgages off the tights of the day. Total origination supply was estimated at ~$5B for the session, which was decidedly the lightest day of the week and well below the $7.7B per day average of the previous week. In Fed activity, they supplemented the demand side of the equation and purchased ~$5.3B of 30yr conventional and government securities. They are scheduled to purchase ~$4.5B of conventional 15yr and 30yrs today. At 5:00pm, 30yr UMBS 2.0s in August were +0.5/32 (101-22) and 15yr UMBS 1.5s in June were +2.5/32 (101-23).

On the origination front, 30yr primary rates were lower on the week. The prevailing 30yr primary rate is ~3.0%, but there are more and more originators now offering sub-3.0% rates. At 3.0%, the primary/secondary spread is currently 128bps, which is certainly tighter week over week as lenders start to pass through the impact of the AMRF retirement. The primary/secondary spread is the difference between the prevailing primary rate and the interpolated MBS par coupon. This measure is used as a rough proxy for a lender’s margin and used to track trends and relative movement.

This morning, treasuries are trading a bit higher across the curve in front of the day’s activity. Currently, the 2yr is +0.25/32 (0.196) and the 10yr is +11/32 (1.245).

From Elliot Eisenberg, the Bowtie Economist: Retirement Reckoning - Two reasons for the worker shortage that get little attention include retirements and business formation. From 2012 through 2019, annual retirements averaged about 2 million/year. In 2020, 3.2 million workers retired! In 2018 and 2019, business applications were 3.5 million/year. In 2020, 4.4 million, and through 5/21 2.5 million, a 6 million/year pace. Worse, the Labor Department’s monthly jobs report does a poor job counting staff at newly established firms.

Outrageous Orbiting - The Friday File: According to some astronomers, space begins at the exosphere, the outermost layer of the atmosphere, about 435 miles high. According to most, it’s the Karman Line, 62 miles above Earth, and beyond which lift from the air can no longer keep winged craft aloft. To the FAA, it’s just 50 miles. Branson’s 90-minute trip took him 50 miles high. Bezos reached the Karman Line, 11 minutes roundtrip.

Marks:

Marks @ 8:00am

2 Year

0.196

10 Year

1.245

FN30 2.0%

101-23+

FN15 1.5%

101-26

The day ahead

US markets are down this morning

Asian markets closed mixed / European markets are down

On the macro front

In terms of economic activity, this week’s calendar is pretty robust and will be highlighted by the conclusion of the FOMC meeting on Wednesday and the subsequent statement and press conference by Chairman Powell. There is plenty that the market will tune in for, including thoughts on current inflationary pressures and the potential timing for the tapering of asset purchases.

Today, the new home sales data for June will be released and is expected to show an improvement of 4.0% month over month following May’s contraction.

Hasbro and Lockheed Martin report results before US markets open. Tesla follows after the close.

Duy Beck
NMLS # 280530

04/01/2021

US treasury yields rose against the backdrop of Biden’s announcement, with 10yr yields up +3.8bps at 1.740%, the highest closing level in over a year, although still beneath the intraday high of 1.774% reached on Wednesday. Inflation expectations were responsible for the rise, and 10yr breakeven climbed +2.7bps to 2.37%, their highest level since 2013, whereas real yields saw a slight rise of +0.8bps.

For the month of March, the Fed purchased $132.4B in agency MBS, the highest monthly total since April’s $295.1B, according to data from the New York Fed. Mortgages closed with the UMBS 30-year coupon stack in a sea of green, aided by month-end duration buying. Today, mortgages will get their last dose of Fed support this week as there will be no purchase operations Friday. The Fed Desk will target $3.3B of UMBS 30-year and $1.5B of UMBS 15-year. In performance, UMBS30 2% through 3% coupons ended mixed with 1.5% and 2% coupons higher by 2/32nds and 1/32nds vs. 2.5% and 3.0% coupon ended 0+/32nds lower. In relative performance to treasuries the 1.5% and 2% coupon were better by 7/32nds and 5/32nds. UMBS15 1.5% and 2% coupons ended 0+/32nds to 1/32nds higher and 3/32nds to 3+/32nds better relative performance vs. treasuries.

Yesterday marked an eventful end to the first quarter as not only did we get the announcement of Biden’s infrastructure package, but multiple European countries moved to toughen up restrictions as the continent has grappled with a rising 3rd wave of infections. This led to a pretty divergent performance for equities on either side of the Atlantic. The S&P 500 (+0.36%) climbed to just short of an all-time high, while hitting its highest ever intraday level of 3994, just shy of breaching the 4,000 mark for the first time.

Regarding yesterday’s data, ADP company payrolls increased by 517,000 during the month and February was revised up to a 176,000 gain. The gain was led by leisure and hospitality sectors. The National Association of Realtors’ index of pending home sales decreased 10.6% from the prior month to 110.3, the lowest reading since May. Surging home prices and low inventory are slowing the pandemic-era housing boom, evidenced by declines in contract signings in all four U.S. regions. At the same time the average rate for a 30-year fixed-rate mortgage has been increasing, which may affect buyer demand in the coming months.

President Biden outlined his “American Jobs Plan” that would see $2.25 trillion invested over the next eight years. The overall price tag breaks down into $620B for transportation and $650B for measures including clean water and high-speed broadband. The bill would earmark $580B for American manufacturing, including $180B in the biggest non-defense R&D program on record. Lastly there is an expected $400B toward care for the elderly and disabled. Unsurprisingly, there was also emphasis on sustainability and the green economy, with money for modernizing the electric grid, as well as building, preserving and retrofitting homes and commercial buildings. In terms of how it’s all being paid for, the plan included changes to the corporate tax code, including an increase in the corporate tax rate to 28%, and a global minimum tax of 21%. The administration said that this would “be fully paid for within the next 15 years and reduce deficits in the years after.” House Speaker Pelosi told her caucus that her aim was to have the bill voted on in the House by July 4th.

There were some developments regarding the pandemic yesterday, as governments across Europe moved to respond to a third wave of the virus. In France, President Macron announced a four-week nationwide lockdown of schools and businesses. Meanwhile in Italy, the government extended their own national restrictions on movement and businesses. The Canadian province of Ontario will go into a 28-day lockdown beginning Saturday.

From Elliot Eisenberg, the Bowtie Economist: This recession has been different from all others not just because spending on goods boomed, when normally it falls, but because spending on services, which usually barely dips, tanked. In 20Q4 Y-o-Y inflation-adjusted goods spending was up 7.2%; it was down 6.8% for services! With savings rates way up and much of that money among the well-heeled, spending on services could recover quickly without much hurting sales of goods.

Marks @ 7:30AM

2 Year

0.162%

10 Year

1.711%

UMBS 30 2.5% (Apr)

102-17+

UMBS 15 2.0% (Apr)

102-19

The day ahead

US equities are up this morning

Asian equities closed up / European equities are mixed

On the macro front

Looking at today’s data docket, we get the initial jobless claims, manufacturing PMIs and some Institute of Supply Management data.

CarMax reports results before US markets open.

US Capital Group
NMLS #1305123

Duy Beck
NMLS #280530

12/31/2020

Happy New Year!

In mortgages, the entire coupon stack outperformed for a third day on Wednesday. The Fed purchased $7.1B relative to $5.9B in the previous session. Total Fed MBS purchases in 2020 came to $1.46T. Volume was light again with the total origination volume coming in at $6.2B. UMBS30 1.5% through 3.0% coupons closed up between 2+/32nds and 1/32nds with spreads outperforming by 1+/32nds in the 2% coupon and 0+/32nds in other coupons versus the treasury curve. UMBS15 1.5% and 2.0% coupons ended higher as well, by 1+/32nds and 2/32nds, and outperformed benchmarks by 0+/32nds and 1+/32nds.

It’s time to bid farewell to 2020. Today marks the end to a tumultuous year. It will correctly go in history books as the year of the pandemic and where the economic data far less outweighed the swings in market vs. macro headlines such as vaccines and politics. The US big tech had their best performance yet, with Amazon and Apple on pace for ~80% equity gains that paled in comparison to Tesla’s 730% runup. The S&P 500 is up more than 15% this year after gaining about 70% from its March lows. This year also propelled emerging markets back to 2007 highs. Valuations are stretched and global debt expanded. The 10-year yield touched 1.944% and 0.3137% this year. Also, ‘don’t fight the Fed’ found new meaning! As central bankers became increasingly unable to influence inflation, they turned to directly impact what they do have control over: markets. They purchased corporate-bond exchange-traded funds, back-stopped the municipal-debt market and injected enough confidence and liquidity into the financial system to lift the prices of just about all assets.

Yesterday, small caps were the best performers with the Russell 2000 rising more than 1%, while the S&P 500, Dow and Nasdaq all finished barely in the green. The enthusiasm was driven by the U.K.’s approval of a new Covid-19 vaccine from AstraZeneca and the University of Oxford. However, the new, highly transmissible strain of the coronavirus that was first detected in the U.K. has now made its way to Ireland and the U.S. In New York City, the positivity rate is approaching levels last seen in the spring, while California reported a record number of deaths on Tuesday.
On the data front, yesterday’s pending home sales fell for the third consecutive month in November. The drop in the index shows more tempered activity in the housing market as prices continue to climb amid lean inventory. Still, the pending sales gauge remains well above pre-pandemic levels. The gauge of contract signings in the West dropped 4.7% to a four-month low. In the Midwest, pending sales declined 3.1%, while in the South they fell 1.1%.
From Elliot Eisenberg, the Bowtie Economist: The percentage of us that WFH will be much higher even after vaccinations and a return to the New Normal. This is because: there’s no longer any stigma, it’s working much better than was expected, IT investments to enable working from home have been made, others are doing it, and older and high-income workers will demand it. I suspect 21% of all work, up from 4%, will be home made.
Current Marks:
Marks @ 7:30AM
2 Year
0.121%
10 Year
0.925%
UMBS 30 2.0%
103-23
UMBS 15 1.5%
102-24

The day ahead
US equities are mixed / flat this morning

Asian equites closed mixed / European equities closed down

US Capital Group, LLC
NMLS #1305123

Duy Beck
NMLS #280530

11/19/2020

Vaccines and the markets:

Mortgages closed ~2.0-3.0/32nds wider to treasuries on Wednesday. Mortgages started the day strong into the larger than normal Fed operation before better investor selling and heavier origination pushed them wider into the close. Origination supply approached ~$11.0B on the day. The Fed purchase schedule includes ~6.7B in 15yr, 30yr, and GNMA securities. At 5:00pm, the FN 30 year 2.0% (Dec) was -4/32nds (103-14+) and the FN 15 year 1.5% (Dec) was -2+/32nds (102-08) from the prior close.

Treasuries were mixed on the day. At the close, the 2-year was unchanged (.175), and the 10-year was -3/32nds (.872).

Stocks dropped again on Wednesday as reports of virus cases increased and new restrictions were announced. Pfizer rallied as they seek authorization for their vaccine that was shown 95% effective. The Housing Starts number came in higher than expected to 1.530 million up from 1.415 million the month prior. The DJIA closed -344.93 to 29,438.42, while the S&P 500 was -41.74 to 3,567.79.

From Elliot Eisenberg, the Bowtie Economist: US retail sales rose just 0.3% in October, their slowest pace since spring. This suggest that, at minimum, consumers are becoming more cautious and possibly that the recovery is slowing as job growth softens, virus cases rise, and government assistance peters out. Moreover, debit and credit card spending are down 4% Y-o-Y and consumer confidence, as measured by four different surveys, has declined of late.

Market Levels (Dec):

Wed
Close (5pm)
Current
2yr175173
10yr872860
FNCL 2.0
103-14+
103-17
FNCI 1.5
102-08
102-09

The day ahead
US equities are down this morning

World equities are mixed

On the macro front
The economic calendar today includes Initial Jobless Claims at 8:30 and Existing Home Sales at 10:00am. Initial claims for unemployment benefits in the United States are expected to have dropped to 707,000 last week. That would be the lowest level since mid-March.
EU leaders meet by videoconference to discuss the bloc's budget through 2027, as Hungary and Poland threaten to hold up approval. Europe's big stimulus package to fight pandemic fallout is also on the line

10/01/2020

Investor demand for riskier assets sent bond prices down and yields higher, with the benchmark 10-year treasury closing 4 basis points up to 0.69%.

As treasuries bear-steepened, mortgages outperformed especially in UMBS30 2.0%s and 2.5%s, up 1-3 ticks (3/32nd) across the coupon stack. Flows were primarily DIC (down in coupon) from 2.5%s to 2.0%s with Tradeweb indicating volume about recent averages. As the month concluded, total GSE issuance fell slightly in September versus August ($224B vs. $247B) as historically low rates continue to fuel purchase and refi booms. UMBS30 2.5% prices fell -2+/32nd to 104-28, and UMBS15 2.0% ended flat at 103-29+. Today, the Fed is scheduled to purchase up to $5.3B in UMBS30, UMBS15 and GNII.

Stocks closed out the third quarter on Wednesday on a high note, gaining 8.5% (S&P) and 7.6% (DJIA) over the past three months. Since the lows in March, the markets have been on a tear, rising more than 25% to near flat on the year, surprising investors in the strength and adaptability of the market. Home builders enjoyed large gains in the 3rd quarter, such as Pulte Group and Lennar, up 36% and 33% respectively in share prices. This can be attributed to the low rate environment coupled with the changing sentiment toward working remotely, as many are investing in their home and living space. Wednesday saw a rally in equities primarily on the backs of positive news regarding a stimulus deal. Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi will meet again today to reach a deal prior to a House vote on the Democrat proposed bill. The DJIA closed up +329.04 to 27781.70 and the S&P rose +27.53 to 3363.00.

From Elliot Eisenberg, the Bowtie Economist: The number of ex-servicepersons in the US is 18 million, or 7% of the adult population. In the House of Representatives, it is 18%, and it is 19% in the Senate. While vastly overrepresented, this is a far cry from the 1965-1975 period when it was 70% in both chambers and peaked at 80% in the Senate in 1975. Why? - the end of the draft and a shrinking army.

Marks @ 7:30am

2 Year

0.13%

10 Year

0.70%

UMBS30 2.5%

104-27

UMBS15 2.0%

103-29

The day ahead

US equities are up this morning

Asian equities closed mixed (the Tokyo Stock Exchange halted all stock trading for Thursday due to as system problem but is expected to resume on Friday) / European equities are mixed

On the macro front

Initial US jobless claims for last week posted at 8:30 a.m. ET. U.S. jobless claims are down but still not as low as pre-pandemic levels. Initial claims decreased to 837k compared to Economist expectations of 850k claims. US personal income and spending data also arrives at 8:30 a.m. ET, followed by the ISM Manufacturing Index at 10 a.m. ET.

Bed, Bath & Beyond, PepsiCo and Constellation Brands are due to report earnings.

09/22/2020

Mortgages performed well given the risk off tone. UMBS 2.0s finished 0+/32nds wider relative to treasuries with a significant down in coupon bias throughout the day. UMBS30 2.5% through 3.5% closed 1/32nds to 2/32nds lower with spreads 2/32nds to 3/32nds ticks wider vs. the treasury curve.

Meanwhile, 10yr Treasuries rallied 2.8bps, though this seemed to be driven mostly by the decline in inflation expectations.

Markets broke down yesterday as renewed fears over the coronavirus, a sharp global bank equity slump and numerous other headwinds led to a sharp sell-off in global risk assets. US banks were down -3.35% among the worst performers. The S&P 500 finished -1.16% while the NASDAQ was down just -0.13%. A substantial late rally in the day hid the extent of the midday losses. The S&P was down as much as -2.72% – with the NASDAQ down -2.54% – in the first hour of trading and remained under pressure for most of the session until tech led the way into the close.

Oil prices suffered as part of the rotation out of risk assets, with both Brent crude (-3.96%) and WTI (-4.38%) losing significant ground. Also, even gold had fallen -1.97% and traded below the $1900/oz mark for the first time in six weeks.

In terms of the coronavirus itself, yesterday saw further concerning developments, particularly in Western Europe. It’s widely expected in the UK that further restrictions are going to be announced, including hospitality venues, like bars and restaurants, ordered to close at 10pm from Thursday. Italy announced plans to test travelers from certain regions of France after seeing their 7-day rolling case count rise above 10,000 for the first time. While in the US, the weekly average has risen to 41,100, but without clear hot spots. Former FDA Commissioner Scott Gottlieb said yesterday that he is expecting the US to go through “at least one more cycle” of infections in the coming cold-weather months.

The Mortgage Bankers Association’s (MBA) latestForbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 8 basis points from 7.01% of servicers’ portfolio volume in the prior week to 6.93% as of September 13, 2020. According to MBA’s estimate, 3.5 million homeowners are in forbearance plans.

“The share of loans in forbearance has dropped to its lowest level in five months, driven by a consistent decline of the GSE share in forbearance,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “However, not only the did the share of Ginnie Mae loans in forbearance increase, new requests for forbearance for these loans have increased for two consecutive weeks. While housing market data continue to show a quite strong recovery, the job market recovery appears to have slowed, and we are seeing the impact of this slowdown on FHA and VA borrowers in the Ginnie Mae portfolio.”

Key findings of MBA's Forbearance and Call Volume Survey – September 7 to September 13, 2020
· Total loans in forbearance decreased by 8 basis points relative to the prior week: from 7.01% to 6.93%.
· By investor type, the share of Ginnie Mae loans in forbearance increased relative to the prior week: from 9.12% to 9.15%.
· The share of Fannie Mae and Freddie Mac loans in forbearance decreased relative to the prior week: from 4.65% to 4.55%.
· The share of other loans (e.g., portfolio and PLS loans) in forbearance decreased relative to the prior week: from 10.71% to 10.52%.

Marks @ 7:30AM
2 Year
0.137%
10 Year
0.672%
UMBS 30 2.5%
104-20+
UMBS 15 2.0%
103-21+
The day ahead
US equities are mixed this morning

Asian equities closed mixed / European equities are up

On the macro front
To the day ahead now, and the highlight will likely be Fed Chair Powell and Treasury Secretary Mnuchin’s appearance before the House Financial Services Committee. More Fed speak today coming from Chicago Fed Evans (non-voter dovish) and Richmond Fed Barkin (non-voter centrist).

Data releases include US existing home sales for August and the Richmond Fed’s manufacturing index for September.

Tesla launches its annual meeting and Battery Day, where CEO Elon Musk is expected to disclose the electric carmaker's latest tech advances, at 4:30 p.m. ET.

Nike and Stitch Fix report earnings.

U.S. Capital Group

05/06/2024

09/30/2021

08/17/2021

08/04/2021

07/26/2021

04/01/2021

12/31/2020

11/19/2020

10/01/2020

09/22/2020

Address

Telephone

Website

Alerts

Shortcuts

Share

Category