October 31st, 2017
Suggestions that can change during the day: After some strong economic data, Mortgage Bonds are showing resilience as they trade near unchanged. Carefully floating is recommended.
After close Commentary: Not much movement in the MBS market today as traders sat on their hands ahead of the Fed statement. Despite some strong economic data from Chicago PMI, Case-Shiller and Consumer Confidence, MBS ended with meager losses. The Fannie Mae 30-yr 3.5% coupon closed at 102.75, -6bp and right at resistance at the 200-day Moving Average. The Dow and S&P notched 7th straight monthly gains while the NASDAQ closed at a record high. The Dow gained 28.50 points to 23,377.24, the S&P rose 2.43 points to 2,575.26, while the NASDAQ closed at 6,727.66, +28.70 points. WTI oil settled at $54.38/barrel, +$0.23. 10-yr yield 2.37%. As mentioned, we have ADP Private Payrolls, the Fed statement and the ISM Index tomorrow.
Late morning Commentary: Home price gains remained solid in August due in part to low mortgage rates and an improving economy. The S&P/Case-Shiller 20-City Home Price Index rose 5.9% year over year, in line with estimates. David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said, “Home price increases appear to be unstoppable.” On a national basis, home prices rose 6.1% from August 2016 to August 2017, up from 5.9% in the previous month.
Americans were upbeat on the U.S. economy and future prospects in October, reports the Conference Board. The Consumer Confidence Index soared to 125.9 this month, the highest since December 2000. The percentage saying business conditions are “good” increased from 33.4% to 34.5%, while those saying business conditions are “bad” rose marginally from 13.2% to 13.5%. However, there was a slight downside in the report. The outlook by consumers on the job market was somewhat less favorable than in September.
The National Retail Federation (NRF) recently reported that holiday sales in November and December are expected to increase between 3.6% and 4%, excluding automobiles, gasoline and restaurants. The total dollar amount should come in around $682 billion, up from $655.8 billion last year. This year, Christmas comes 32 days after Thanksgiving, giving shoppers one more day to finish their shopping. This year's forecast of 3.6% would match last year's and is just above the five-year average of 3.5%.
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