January 18th, 2017
WRAP: Mortgage Bonds have given up just over 100bp since last Thursday's high. The 3.5% Fannie Mae 30-yr coupon hit 103.12 on Thursday and closed at 102.09 today, down 66bp. It took 18 business days for the Bond to rise 231bp and only three days to lose just over 100bp. Stocks closed mixed and near unchanged levels as Fed Chair Yellen said it "makes sense" to gradually lift interest rates. The Dow lost 22.05 points to 19,804.72, the Nasdaq was up 16.92 points to 5,555.65, while the closely watched S&P 500 gained 4 points to end the session at 2,271.65. WTI oil closed at $51.08/barrel, -$1.40. 10-yr yield closed at 2.42% from the 2.32% low seen early in the trading day. Housing Starts, Building Permits, Weekly Initial Jobless Claims and the Philly Fed will be released tomorrow morning.
Commentary 3:53 pm: The Beige book appears to be the problem with rates today. The Key comments that alert traders to the potential of pending inflation are: Pricing pressures, Labor markets tight or tightening and problems finding Skilled Workers.
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.
3:29 PM Yellen says rates will not rise dramatically.
3:27 PM Fed Chair Yellen says rates will creep higher. Expects 3% Fed Funds Rate by end of 2019.
2:03 PM Beige Book: problems finding skilled workers.
2:01 PM Beige Book says economy growing at a modest pace in most regions. Labor markets tight or tightening.
2:01 PM Beige Book: pricing pressures intensified somewhat.
1:01 PM MBS fall to session lows. Alert To Lock!
12:54 PM Near midday, MBS lower and at session lows. S&P near unchanged. 10-yr yield 2.37%.
11:59 AM Be on guard.
11:54 AM Flat to lower Stock prices, Fed buying, can't help to propel MBS higher higher as they trade well into negative territory and at session lows. The 3.5% Fannie Mae 30-yr coupon now rests on support at 102.44 after failing to break above resistance levels.
11:10 AM MBS fall to session lows.
10:01 AM The January NAHB Housing Market Index falls to 67 from 69 in December and below the 69 expected. Last year this time the index was 61.
10:00 AM The New York Fed just purchased $1.99B in Fannie/Freddie 30-yr 3s and 3.5s, though prices are still in negative territory.
10:00 AM The S&P edges back into positive territory.
9:34 AM The S&P quickly slides into negative territory.
9:32 AM The S&P opens slightly higher.
8:58 AM WTI oil is lower by $1.07 to $51.44/barrel as investors doubt a cut by OPEC.
8:47 AM Year-over-year CPI at 2.1%, fastest pace since June 2014.
8:31 AM December CPI 0.3%, inline. Core inline at 0.2%.
8:30 AM MBS prices edging lower.
8:27 AM Citigroup beats on earnings, misses on revenues.
8:21 AM Stiff resistance continues to cap MBS prices.
8:18 AM The MBAs Market Composite Index, a measure of total mortgage application volume, rose slightly by 0.8%. The refinance index +7%, purchase index -5%.
8:13 AM December CPI will be released at 8:30, expected +0.3%.
8:13 AM The January NAHB Housing Market Index will be released at 10:00 ET.
8:12 AM Minneapolis Fed President Kashkari (voter) will speak this morning at 10:00 ET, while Fed Chair Yellen will be speaking at 3:00 ET.
8:07 AM MBS open lower in sympathy with falling Treasury prices and higher yields.
7:59 AM The MBA reports that the average 30-yr fixed conforming mortgage rate ($424K or less) fell to 4.27% from 4.32%, jumbo rate (greater than $424K) at 4.22% from 4.27%.
7:58 AM With S&P futures higher and the dollar rebounding, Bond prices are lower, yields higher.
7:58 AM 10-yr T Note yield 2.36% from yesterday's close of 2.32%.
7:56 AM Goldman Sachs easily beats earnings estimates and both the top and bottom lines. S&P futures now positive after the news.
This week's Calendar
|Date & Time of Report||Report||For||Estimate||Actual||Prior||Impact|
|1/17/17 8:30 AM||Empire State Index||Jan||8.3||6.5||9||Moderate|
|1/18/17 8:30 AM||Consumer Price Index (CPI)||Dec||0.30%||0.30%||0.20%||High|
|Core Consumer Price Index (CPI)||Dec||0.20%||0.20%||0.20%||High|
|1/18/17 10:00 AM||Housing Market Index||Jan||69||67||69||Moderate|
|1/18/2017 2:00 PM||Beige Book||Jan||NA||NA|
|1/19/2017 8:30 AM||Housing Starts||Dec||1193K||1090K||Moderate|
|Philadelphia Fed index||Jan||15.3||21.5||Moderate|
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