Stocks are moving higher in the AM as investor attention shifts to Federal Reserve Chairman Jerome Powell. The man at the helm of the US Central Bank is scheduled to deliver a speech at 12PM EST in front of the New York Economic Club, so pay close attention to any rhetoric that deviates from expectations. The S&P500 is currently trading at 2,689.44, 0.27% higher, and is up about 0.57% YTD.
Treasuries are churning in place to begin Wednesday’s trading session as investors avoid major shifts in allocations before the Fed Chair speaks. The debate surrounding rate hikes in 2019 has been escalating as of late, as a rout in global equities/commodity pricing has exacerbated angst amongst money managers. The 2/10 yr spread is currently hovering around 22bps, nearing its YTD low of 18bps. Additionally, pay close attention to the G-20 summit taking place in Argentina this week as trade, tariffs, and oil supply will likely dominate discussions. The US 10-YR Note is currently trading at 3.0681%, 0.0109 higher.
MBS Performance and Volumes
MBS put in a solid performance on Tuesday, with virtually all TBAs outpacing their hedge ratios. 30-year Fannies outperformed the 10-year note by 2-3 ticks, led by lower coupons (3s and 3.5s). Ginnie IIs had an even stronger session; GNII 3s, 3.5s and 5s all outperformed 10s by 4/32s, while 4s and 4.5s finished 3 ticks ahead of the Treasury note. Most notable in Ginnies was that the GNII 5 roll moved out 2/32s and is now trading at least 1+ special, depending on your speed assumption. 15-year Fannies outpaced the 5-year note by 1-2 ticks. Trading was moderately active, with FINRA reporting that a total of $168 billion changed hands, including $8 billion in specified pools.
MBA Mortgage Applications came in at a 5.5% increase for the week ended November 23 after a 0.1% drop in the week prior. Purchases increased 8.8% after a 3.1% rise in the prior reading. Refinances increased 0.5%, and accounted for 37.9% of total applications. The average contract interest rate for a 30 Yr conforming fixed commitment fell 4bps to 5.12%.
TBA MBS’ are little changed in front of Jerome Powell’s speech at the New York Economic Club. New Home Sales came in at an 8.9% decrease MoM for the month of October versus analyst estimates of a 4.0% increase. The number of new homes sitting for sale on the market hit its highest level since 2009. Liquid coupons are flat.
The USD is marginally higher to begin Wednesday’s exchange, gaining most notably against the EUR and JPY. The DXY is currently trading at 97.47, 0.12% higher.
Oil is giving up early morning gains after EIA data displayed the 10th consecutive build in US stockpiles. WTI is currently trading at 50.68, 1.71% lower.