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Thanksgiving Hours: Nations Direct is closed on Thursday and Friday, no new rates until Monday.
Stocks are trending higher to begin Wednesday’s trading session after a precipitous drop in the exchange prior. Indiscriminate selling pushed the S&P500 into negative territory for the year yesterday as asset allocators dumped positions. Slowing global growth, rising interest rates, and trade/political uncertainty continues to weigh on investor psyche. The S&P500 is currently trading at 2,663.31, 0.81% higher.
Treasuries are little changed in the AM as the street digests a plethora of economic data. It looks like investors are starting to revisit their 2019 Fed forecasts in the wake of the recent violent global equity selloff. The US 10-YR Note is currently trading 3.0719%, 0.0091 higher, and is about 1bp lower on the week.
MBS Performance and Volumes
MBS lagged their Treasury hedge ratios for the second straight day, as the 10-year ended the day unchanged and the yield curve flattened. 30-year Fannies lagged the 10-year by between 1-3 ticks, with FN 4s having the best session. Ginnie IIs exhibited a down-in-coupon bias, as GNII 5s trailed the 10-year by 4/32s while 3.5s through 4.5s lagged by 3 ticks. 15-year Fannies had a relatively strong session; most coupons lagged the 5-year note by a tick, reflecting the weakness in the intermediate sector of the Treasury curve. Trading volumes were relatively solid given the calendar, with just under $179 billion in total activity, including $11.6 billion in spec pool trades.
MBA Mortgage Applications came in at a 0.1% decrease for the week ended November 16. Purchases increased 3.1% after a 2.3% rise in the prior reading. Refinances fell 5%, and accounted for 38.5% of total applications. The average contract interest rate for a 30-yr conforming fixed rate commitment came in at 5.16%.
TBA MBS’ are churning sideways in the AM as volume dries before the Thanksgiving holiday. Existing home sales came in at a 1.4% MoM increase for the month of October, versus analyst expectations of a 1.0% rise. This marks the first time in seven months that sales have increased. Existing home sales account for about 90% of the market, and are accounted for when a contract closes. Liquid coupons are currently trading flat – 0+ tic higher.
The USD is moving lower to begin Wednesday’s trading session as investors assess the trajectory/speed of interest rate hikes in 2019. The DXY is currently trading at 96.66, 0.17% lower.
Oil is trading higher despite today’s EIA report which conveyed a surprise increase in inventories. WTI is currently trading at 54.44, 1.89% higher.