March 15th, 2017
Commentary at the close: MBS exploded to upside and have gained even further ground, breaking through resistance one (R1) for the Fannie Mae 30-yr 3.5% coupon. We are hoping to build a little momentum. This all happened after the Fed hiked rates. Traders and investors expected a more hawkish monetary policy statement. It is all in your expectations keep them low and you will be happy with what you get. That is what happened today.
Boiled down the events of the day:
3.5% Fannie Mae 30-yr coupon up 78 bp at a price of 101.66 up 69 bp when rates were set yesterday at 10:00 am Open 100.97 High 101.66 Low 100.88 See Chart below
The Fed raised its benchmark short-term Fed Funds Rate by 0.25% to bring it to the 0.875% level. Stocks also rallied as the Fed reiterated there will be two more rate hikes in 2017, which eased uncertainty surrounding the hikes. The Dow gained 112.73 points to 20,950.10, the S&P 500 was up 19.81 points to 2,385.26, while the NASDAQ rose 43.23 points to end the session at 5,900.04. Oil prices also rallied after the IEA reported that OPEC oil production cuts could create a crude deficit in 2017. WTI oil closed at $48.86/barrel, +$1.14. 10-yr T Note yield fell to 2.50% from the session high of 2.60%. Tomorrow's data includes Housing Starts/Building Permits, Philly Fed Index and Weekly Initial Jobless Claims.
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 Dow now +120 points.|
|3:28 PM 10-yr T Note yield falls to 2.50% from the session high of 2.60%.|
|3:22 PM Yellen tells consumers after rate hike: "The simple message is the economy is doing well."|
|3:00 PM MBS at session highs.|
|2:51 PM Alert To Float!|
|2:50 PM Fed Chair Yellen's press conference doesn't rattle the markets. No big changes. No decisions on the Fed's balance sheet.|
2:15 pm At first Glance the bond market likes what it sees. Next up Janet Yellen. (See below)
2:14 pm 3.5% Fannie Mae 30-yr coupon up 46 bp at a price of 101.34 up 38 bp when rates were set yesterday at 10:00 am Open 100.97 High 101.50 Low 100.88
|2:08 PM Stocks add to gains after the Fed statement.|
|2:07 PM Fed says inflation moves closer to its goal.|
|2:07 PM Fed: economy will warrant gradual rate hikes.|
|2:05 PM Fed forecasts two more rate hikes this year.|
|2:02 PM Fed raises the short-term Fed Funds Rate by 0.25% to make it 0.875%.|
|1:07 PM U.S. dollar index 101.32, -0.25.|
|12:54 PM At midday, MBS flat to slightly higher. Dow, S&P and NASDAQ are all higher ahead of the the 2:00 p.m. ET release of the Fed statement. 10-yr yield 2.57%.|
|12:03 PM The Atlanta Federal Reserve Bank expects final GDP in Q1 2017 at 0.9%, down down 1.2% on March 8.|
|11:05 AM Stocks adding to gains. The Fannie Mae 30-yr 3.5% coupon gives up gains, now unchanged.|
|10:09 AM The March NAHB Housing Market Index jumps 7 points to 71, highest in 12 years. The rise in positive sentiment was due in part to "President Trump's actions on regulatory reform, particularly his recent executive order to rescind or revise the waters of the U.S. rule that impacts permitting," says the NAHB.|
|9:33 AM The S&P trades modestly higher soon after the opening bell on Wall Street.|
9:05 AM Oil prices recovering as the IEA sees OPEC cuts creating crude deficit in the first half of 207, reports CNBC. WTI oil $48.48/barrel, +$0.79.
8:52 AM The MBAs refinance index +4.1%, purchase index +2.3%.
8:50 AM Potential borrowers were unfazed by the rise in mortgage rates as the the MBAs Market Composite Index, a measure of total mortgage loan application volume, increased 3.1% in the latest week to 418.1, highest since 2014.
8:49 AM MBA: 30-yr jumbo mortgage rate up 17bp to 4.44%, its highest since April 2014. FHA 30-yr fixed mortgage rate +11bp to 4.29%, highest since January 2014.
8:44 AM The MBA reports that the 30-yr fixed conventional mortgage rate ($424K or less) rose 10bp to 4.46%, the highest level since April 2014.
8:43 AM Not much reaction to the 8:30 economic data.
8:42 AM Retail Sales x-autos 0.2% vs the 0.1% expected.
8:41 AM February Retail Sales 0.1%, inline, though down from the 0.6% in January.
8:36 AM March Empire Manufacturing 16.4 vs the 14.5 expected.
8:35 AM Core CPI, which strips out volatile food and energy, +0.2% , in line.
8:34 AM February CPI declines to +0.1%, in line, from 0.6% in January due in part to lower gasoline prices.
8:29 AM CPI, Empire Manufacturing at 8:30, NAHB Housing Market Index at 10.
8:23 AM Ahead of the Fed, S&P futures are higher. The 10-yr T Note yield edges lower to 2.57% from yesterday's close of 2.60%.
8:19 AM At 2:30 p.m. ET., Fed Chair Yellen will hold a press conference to discuss the current state of the U.S. economy and the Fed's decision on interest rates.
8:17 AM MBS open modestly higher ahead of the biggest event for the U.S. markets since December ... the Fed's monetary policy statement which is to be released at 2:00 p.m. ET.
8:17 AM It is expected that the benchmark short-term Fed Funds Rate will rise by 25bp to the 0.75% - 1.0% range.
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