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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   98-19.5 (+11)  
  FN 2.5% Coupon   104-15.5 (+04.5)  
  Support   1.052%  
  Resistance   0.790%  
  Wednesday, February 17, 2021

Treasury Yields Lower as Retail Sales Outperform

Market opened today's session with treasuries higher across all maturities. 10-Year Treasury yield is at 1.2787, 3.54 bps decreased from prior closing of 1.3141.

US stocks opened lower this morning after moving towards a one-year high yesterday. Tech shares were among the notable losers this morning, with focus being placed on those equities with the highest exposure to inflation pressure. In Europe retailer Kering saw shares move lower following a miss on quarter four estimates by its sub-brand Gucci. Alternatively, Rio Tinto Group, a leading iron ore producer, noted a 20% increase in annual profits, in part thanks to a 70% increase in ore prices instigated by increased demand from China and lower iron output from Brazil. Elsewhere, Bitcoin pushed past 51K, all the while WTI crude and Gold both lowered by 0.3% and 0.6%, respectively. On the economic front, MBA Mortgage Applications moved lower for the week ending February 12, reporting a drop of 5.10%, after having reported a decrease of 4.10% a week prior. Notably, purchases and refis were both down by 6.10% and 4.70%, with refis representing 69.3% of loans. The average 30 year fixed rate stood at 2.98%. PPI Final Demand for the month of January noted a significant and sizable beat over expectations after reporting an increase of 1.30%. Significantly higher than the prior recorded increase of 0.30%, today's figure noted an increase in final demand of 2.00% year over year, when excluding food and energy costs. Retail Sales for the month of January also noted significant outperformance over expectations of a 1.10%, reporting an increase of 5.30%. With COVID cases declining and states beginning to reopen, spending in January saw wide increases in a variety of categories, with department stores in particular noting an increase of 23.5%. Further fiscal aid is expected to continue spurring sales, with President Joe Biden's administration continuing to push through its $1.9 billion stimulus aid package, currently expected to be passed by Democrats without need for Republican votes. In regard to Industrial Production for the month of January, expectations of a 0.40% increase were doubled after noting an increase of 0.90%. Factory output in particular is 1.90% away from pre pandemic levels as lean inventories and steady demand work in its favor. Headwinds still remain in labor shortages, however this issue is expected to lessen as vaccinations continue. Notably, total Capacity Utilization increased to 75.60%, all the while oil and gas drilling rose by 11.30%, still 50% lower than a year ago. Reporting tomorrow are Housing Starts and Initial Jobless Claims, both expected at 1660K and 770K, respectively.

The curve has bull-flattened with UST 10-Year yield down 3.54 bps.
This Week's Events
  02/16 Empire Manufacturing 05:30 Feb 6.00 12.10 3.50 -  
  02/17 MBA Mortgage Applications 04:00 12 Feb - -5.10% -4.10% -  
  02/18 Building Permits 05:30 Jan 1679k - 1709k 1704k  
  02/18 Building Permits MoM 05:30 Jan -1.50% - 4.50% 4.20%  
  02/18 Housing Starts 05:30 Jan 1660k - 1669k -  
  02/18 Housing Starts MoM 05:30 Jan -0.50% - 5.80% -  
  02/18 Initial Jobless Claims 05:30 13 Feb 770k - 793k -  
  02/18 Continuing Claims 05:30 6 Feb 4400k - 4545k -  
  02/18 Bloomberg Consumer Comfort 06:45 14 Feb - - 44.90 -  
  02/19 Markit US Manufacturing PMI 06:45 Feb P 58.50 - 59.20 -  
  02/19 Markit US Composite PMI 06:45 Feb P - - 58.70 -  
  02/19 Markit US Services PMI 06:45 Feb P 58.00 - 58.30 -
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