December 21, 2018

Market News

Stocks opened higher Friday helping all three major indexes rebound from their near 5% decline this week. All S&P 500 sectors are trading in the green, led by consumer discretionary stocks. The Dow Jones Industrial Average is being pushed higher with the help of Nike Inc. after its quarterly results overshot analyst’s projections. The S&P 500 is currently trading at 2502.81, 1.43% higher.

Treasury yields are little changed Friday after a week that compressed yield spreads following along with the steep losses in equities. Friday’s durable orders data suggests that business investment is weak which may push investors to a more risk-off approach. The 10-year Treasury is currently trading at 2.799%, 0.010 lower.

Data:  Personal income increased 0.2% month-over-month in November.  Personal spending rose 0.4%.  PCE Price Index increased 0.1% while the core PCE Price Index, which excludes food and energy, also increased 0.1%.  PCE inflation continues to run under the Fed’s 2% target

MBS Performance and Volumes

MBS mostly outperformed their Treasury hedge ratios on Thursday amid decent volumes.  30-year Fannies outperformed the 10-year note by 1-3 ticks, duration-adjusted, with Fannie 4s and 5s putting in the best performance and Fannie 3s lagging.  Ginnies had a weaker session; GNII 3s through 4s outpaced the 10-year by a tick, while GNII 4.5s tracked the Treasury note and 5s lagged by 2/32s.  15-year Fannies were mixed versus the 5-year, as fuller coupons outperformed while Dwarf 3s tracked 5s.  FINRA reported $228 billion in total trades including just under $14 billion in specified pools, a fairly robust day given the calendar.


Josh Pappert – VP, Capital Markets
Nations Direct Mortgage