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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   101-13 (+14.5)  
  FN 3.5% Coupon   103-07 (+01)  
  Support   2.753%  
  Resistance   1.503%  
  Friday, February 7, 2020

Treasury Yields Sharply Decline on Coronavirus Fear

Market opened today’s session with treasuries advancing across all maturities. 10-Year Treasury yield is at 1.5748, 6.74 bps decreased from prior closing of 1.6422.

US equity index futures slumped as concerns about the economic fallout overshadowed strong US jobs report released this morning. The confirmed cases of the coronavirus exceeded 31,000 with the death toll reaching 638. The recent optimism that the global economy will be able to weather the economic damage caused by the coronavirus got dampened with fresh reports of mounting confirmed cases, deaths, and quarantines. Also, the economic fallout for companies started to emerge; Toyota and Honda extended shutdowns at their Chinese manufacturing facilities and Burberry scrapped its financial guidance for the year over the expected sales hit in China. Apple’s iPhone maker Foxconn also muddied investor sentiment after telling their employees not to return to work at its Shenzhen facility when the extended holiday ends on February 10th. Elsewhere, WTI crude also sold-off this morning, trading slightly above $50 a barrel.

January’s strong jobs report came in just when investors started questioning the outlook for economic growth due to the coronavirus, making a very minimal impact on the market this morning. Nonfarm Payrolls easily beat the expectation of 165k at 225k in January. Despite the slight increase in Unemployment Rate from 3.50% to 3.60% and another 12k loss in manufacturing payrolls, the overall tone was perceived to be quite strong as the labor force participation rate reached 63.40%, marking the highest level since June 2013. Lastly, Wholesale Inventories declined to -0.20% from -0.10% prior vs. -0.10% consensus.

The curve has bull-flattened with UST 10-Year yield down 6.74 bps.
This Week's Events
  02/03 Construction Spending MoM 07:00 Dec 0.50% -0.20% 0.60% 0.70%  
  02/03 ISM Manufacturing 07:00 Jan 48.50 50.90 47.20 47.80  
  02/03 ISM Prices Paid 07:00 Jan 51.00 53.30 51.70 -  
  02/04 Factory Orders 07:00 Dec 1.20% 1.80% -0.70% -1.20%  
  02/04 Durable Goods Orders 07:00 Dec F 2.40% 2.40% 2.40% -  
  02/04 Durables Ex Transportation 07:00 Dec F -0.10% -0.10% -0.10% -  
  02/05 MBA Mortgage Applications 04:00 31 Jan - 5.00% 7.20% -  
  02/05 ADP Employment Change 05:15 Jan 157K 291K 202K 199K  
  02/05 Trade Balance 05:30 Dec -$48.20b -$48.90b -$43.10b -$43.70b  
  02/05 Markit US Services PMI 06:45 Jan F 53.20 53.40 53.20 -  
  02/05 Markit US Composite PMI 06:45 Jan F - 53.30 53.10 -  
  02/06 Initial Jobless Claims 05:30 1 Feb 215K 202K 216K 217K  
  02/06 Continuing Claims 05:30 25 Jan 1720K 1751K 1703K -  
  02/06 Bloomberg Consumer Comfort 06:45 2 Feb - 66.50 67.30 -  
  02/07 Change in Nonfarm Payrolls 05:30 Jan 165K 225K 145K 147K  
  02/07 Average Hourly Earnings MoM 05:30 Jan 0.30% 0.20% 0.10% -  
  02/07 Average Hourly Earnings YoY 05:30 Jan 3.00% 3.10% 2.90% 3.00%  
  02/07 Wholesale Inventories MoM 07:00 Dec F -0.10% -0.20% -0.10% -  
  02/07 Wholesale Trade Sales MoM 07:00 Dec 0.10% -0.70% 1.50% 0.90%
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  This information is provided solely for informational use and is not intended as an advice for trading or investment purposes in any manner whatsoever. Sun West Mortgage Company, Inc. is not a licensed or registered broker or dealer and cannot provide investment strategies or recommendations. This information is provided to licensed brokers/lenders only and may not be copied or distributed to customers or potential customers. All loans are subject to approval. Certain restrictions may apply. Listed pricing is a morning indication only. Program rates, prices, guidelines, fees, costs, terms and conditions are subject to change without notice.  
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