November 14th, 2016
End of the day commentary:
Another rough outing for Bonds as the prospect of rising inflation is causing a ruckus. Like virtually every big sell off in Bonds that we have seen over the past couple of decades, it is never a one and done. There are several days of losses and some, like today, can be quite heavy. Where is the next stop? A look at the chart shows prices are trading in a support area near the $100 level. A fall below this area would usher in another round of selling.. We do think the sell off is overdone but at the same time we do not want to jump in and try to “catch a falling knife” as prices continue to drift lower.
The volatility continued in the Bond markets today as the 3% Fannie Mae 30-yr coupon traded in a wide 66bp range, trading as low as 100.00, then to 100.66 only to close at 100.16. Investors feel that the new Trump administration could be inflationary, which continues to push Bond yields higher. The 3% Fannie Mae 30-yr coupon lost 94bp to end at 100.16. Look for us to switch the main focus to the 3.5% coupon in a few business days. There were no economic reports to influence trading today. The Stock rally that took place after the Trump victory stalled in today's session as tech stocks weighed on the markets. The notion that investors may be feeling that Mr. Trump's policies, when he gets to office, will curtail tech sales in China and other markets overseas. The Dow closed higher for its sixth straight session, despite the losses in the tech sector closing at a fresh all-time high of 18,868.69, +21.03 points. The S&P closed near unchanged at 2,164.20, while the tech heavy Nasdaq dropped 18.71 points to end the session at 5,218.39. WTI oil closed near unchanged at $43.32/barrel. The 10-yr T Notes yield was last seen at 2.25%. Tomorrow's economic data includes October Retail Sales and November Empire Manufacturing.
What Is Going On With Interest Rates? #wigowir
Below is the news when it happened and the market’s reaction. For a full view of the day start at the bottom and work your way up. If want to know what just happened start at the top. All Times are Eastern Standard Time. When the price of Mortgage Backed Securities (MBS) goes down rates go up, and when the price goes up rates come down. Remember in the bond market Bad News is Good News and Good News is Bad news.
3:05 PM Mortgage Bonds seem to be oversold at current levels. Caution still remains.
12:50 PM Near midday, MBS lower, though well off worst levels. S&P lower. U.S. dollar surges. 10-yr yield hit 2.30% early in the session, now at 2.19%.
11:59 AM The dollar soars to 100.14, +1.09 as yields spike. U.S. bank stocks rise.
11:58 AM The 3% Fannie Mae 30-yr coupon is now 53bp off the session low.
11:19 AM A recent report from ATTOM Data Solutions shows a total of 105,481 foreclosure filings, default notices, scheduled auctions or bank repossessions, in October, up 27% from September.
11:01 AM The Dow, Nasdaq and S&P all fall into negative territory. MBS well off the session lows, though still dramatically lower from Thursday's close.
10:48 AM MBS able to bounce off today's extreme lows.
10:48 AM The S&P 500 turns negative.
10:38 AM Fed Fund Futures show an 85% chance of a hike in the Fed Funds Rate next month.
9:56 AM With the 30-yr fixed conventional rate at 3.75% and moving higher as reported by the MBA, look for the switch to the 3.5% Fannie Mae 30-yr as the benchmark by week's end.
9:32 AM Stocks open modestly higher.
9:29 AM The Dow looks to open at a fresh all-time high.
9:29 AM The 2.23% 10-yr yield is the highest for 2016.
9:26 AM S&P futures push higher.
9:24 AM There are no economic reports due for release today but the rest of the week's calendar brings Retail Sales, housing, consumer and wholesale inflation along with manufacturing data.
9:18 AM The Bond markets feel that increased infrastructure spending with greater spending could speed inflation.
9:17 AM U.S. dollar index 99.91, +0.87
Why bonds yields are rocketing higher. Click on the following link from Yahoo:
9:14 AM WTI oil at $42.87/barrel, -$0.56.
Johnmarbury.com has attempted to verify the information contained on this post. However any aspect of such may change without notice. Johnmarbury.com does not provide investment advice and does not represent that any of the information or related analysis is accurate or complete at any time.