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Thanksgiving Hours: Nations Direct is closed on Thursday and Friday, no new rates until Monday.
Stocks are moving lower to begin the week as the technology sector thwarts major US indices. Additionally, WTI is falling in the early going, putting pressure on the energy sector. The trade/tariff narrative is back at the forefront of investor attention after Vice President Mike Pence stated “We’ve put tariffs on $250 billion in Chinese goods, and we could more than double that number.” The S&P500 is currently trading at 2,722.98, 0.48% lower, and is up about 1.81% YTD.
Treasuries are churning sideways in the AM as investors digest the latest trade rhetoric stemming from the world’s two largest economies. Short positions on USTs fell to nearly half of September’s record setting reading according to the CFTC, as investors reassess the trajectory and speed of interest rate hikes in 2019. The 2/10 Yr spread was little changed last week at 25bps as central banks around the globe acknowledged the slowing pace of growth. The US 10-YR Note is currently trading at 3.0701%, 0.0073 higher.
MBS Performance and Volumes
MBS mostly outperformed Treasuries on Friday, as the continued rally pushed the 10-year Treasury yield below 3.10%. 30-year Fannies ended the session 1-2 ticks better than 10s, duration-neutral, with 4.5s putting in the strongest performance. Ginnie IIs mostly outperformed 10s by a tick, although GNII 3s lagged the 10-year by 1/32. 15-year Fannies were mixed, with 2.5s outperforming the 5-year note (the best performer on the Treasury curve) by 2/32s while 3s and 3.5s both lagged by 2 and Dwarf 4s closed in line with 5s. Trading activity was relatively light, with just over $133 billion in total trades, including $8b in specified pools.
TBA MBS’ are little changed to begin Monday’s trading session. The NAHB Housing Market Index came in at 60 versus analyst expectations of 67. November’s 8 point precipitous drop marks the largest decrease since 2014, and is largely attributable to rising interest rates and increasing building material costs. Liquid coupons are currently trading 0+ tic lower.
The USD is moving lower in the AM, depreciating most notably against the EUR, GBP, and JPY. Political turmoil continues to steer allocations overseas as Italy’s budget and Brexit turmoil has currency investors on edge. The DXY is currently trading at 96.16, 0.29% lower.
Oil is losing steam in the early morning shuffle as crude continues to fall through key technological/psychological levels. WTI is currently trading at 55.45, 1.79% lower.