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Market Commentary

Market Commentary


Today's Coupons
  10-Year Notes   99-02.5 (+10)  
  FN 2.5% Coupon   105-04 (+07.5)  
  Support   1.942%  
  Resistance   0.505%  
  Friday, August 28, 2020

Treasury Yields Lower as Markets React to the Fed's New Inflation Target

Market opened today's session with treasuries edging higher across all maturities. 10-Year Treasury yield is at 0.7129, 3.93 bps decreased from prior closing of 0.7522.

US Stocks gained for a seventh day and the dollar weakened to a more than two year low as the Federal Reserve's new inflation target rippled through markets. S&P 500 rose to the verge of a new record following Jerome Powell's signal on thursday that the Fed will keep an accommodative stance with higher tolerance given to consumer price increase. Elsewhere, the Stoxx Europe 600 Index retreated as the euro strengthened against the dollar which headed for its worst daily decline in more than four months. Gold advanced. The Yen surged against the greenback on the news that the Japanese Prime Minister Shinzo Abe will resign due to health reasons. European bonds pared earlier declines along with Treasuries after a euro-area economic confidence measure improved. In other news, crude oil steadied as Hurricane Laura weakened while crossing over land in the refinery and LNG-rich Gulf of Mexico region. Emerging-market currencies gained, with South Africa's rand strengthening as much as 2%. On the economic front, Wholesale Inventories reported a drop of 0.10% for the month of July, with US imports and exports both rising by 11.80%. Personal Income and Spending both beat expectations after reporting an increase of 0.40% and 1.90% respectively. This comes as the rebound in consumer spending slowed in the month of July amid a surge in virus cases, with an additional roadblock imposed following the government cut in unemployment benefits as of the end of July. While spending has increased in recent months total outlays remain below pre-pandemic levels. President Donald Trump signed an executive order in early August to provide an extra weekly $300 in federal benefits for most unemployment insurance recipients as a stopgap measure following lawmakers failure to agree on a stimulus plan, however this may still fall short as it may take weeks before the program goes into full effect. Elsewhere, the Chicago PMI index lowered to 51.20, and the University of Michigan Sentiment report rose to 74.10.

The curve has bull-flattened with UST 10-Year yield down 3.93 bps.
This Week's Events
  08/24 Chicago Fed Nat Activity Index 05:30 Jul 3.70 1.18 4.11 5.33  
  08/25 FHFA House Price Index MoM 06:00 Jun 0.30% 0.90% -0.30% -0.20%  
  08/25 S&P CoreLogic CS 20-City MoM SA 06:00 Jun 0.10% 0.00% 0.04% -0.03%  
  08/25 S&P CoreLogic CS 20-City YoY NSA 06:00 Jun 3.60% 3.46% 3.69% 3.61%  
  08/25 Conf. Board Consumer Confidence 07:00 Aug 93.00 84.80 92.60 91.70  
  08/26 Durable Goods Orders 05:30 Jul P 4.80% 11.20% 7.60% 7.70%  
  08/26 Durables Ex Transportation 05:30 Jul P 2.00% 2.40% 3.60% 4.00%  
  08/27 GDP Annualized QoQ 05:30 2Q S -32.50% -31.70% -32.90% -  
  08/27 Personal Consumption 05:30 2Q S -34.20% -34.10% -34.60% -  
  08/27 GDP Price Index 05:30 2Q S -1.80% -2.00% -1.80% -  
  08/27 Core PCE QoQ 05:30 2Q S -1.10% -1.00% -1.10% -  
  08/27 Initial Jobless Claims 05:30 22 Aug 1000k 1006k 1106k 1104k  
  08/27 Continuing Claims 05:30 15 Aug 14400k 14535k 14844k 14758k  
  08/27 Bloomberg Consumer Comfort 06:45 23 Aug - 44.30 43.50 -  
  08/28 Personal Income 05:30 Jul -0.20% 0.40% -1.10% -1.00%  
  08/28 Personal Spending 05:30 Jul 1.60% 1.90% 5.60% 6.20%  
  08/28 PCE Deflator MoM 05:30 Jul 0.40% 0.30% 0.40% 0.50%  
  08/28 PCE Deflator YoY 05:30 Jul 1.00% 1.00% 0.80% 0.90%  
  08/28 U. of Mich. Sentiment 07:00 Aug F 72.80 74.10 72.80 -
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