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Market Commentary

Market Commentary

Today's Coupons
  10-Year Notes   98-24.5 (+15)  
  FN 3.5% Coupon   103-11 (+03.5)  
  Support   3.237%  
  Resistance   1.457%  
Wednesday, September 18, 2019
Treasury Yields Continue to Decline: Monetary Policy Meeting - Day 2
Market opened today’s session with treasuries rallying across all maturities. 10-Year Treasury yield is at 1.7648, 3.65 bps decreased from prior closing of 1.8013.

The Federal Reserve concludes its policy meeting today and Chairman Jerome Powell will confirm if officials have agreed to cut interest rates again, which would be the bank’s second rate cut in a decade. The Dow futures indicated a loss of 45 points at the open. S&P 500 and Nasdaq 100 futures both slipped 0.10%. Energy shares fell after Trump told the Treasury Secretary to “substantially increase” sanctions on Iran after a series of attacks targeting Saudi Arabia’s oil production. Although Iran maintains that it was not behind the attacks, the Energy Select Sector dropped 0.90%. Saudi Aramco, the national oil company, said it had revived 41% of capacity at one of the processing facilities which endured structural and equipment damage from Saturday’s aerial attack. The Saudi Minister also stated that they expect oil production capabilities to be fully restored and oil out-put will be back to pre-attack levels by the end of September. West Texas Intermediate crude oil declined 1.40% to $58.52 a barrel. The yield on 10-Year Treasuries and 2-Year Treasuries declined two basis points to 1.78% and 1.70%, respectively. The US Treasury will offer $45 billion and $40 billion at its weekly auction of four-week and eight-week bills, respectively.

As trade negotiations continue into next month, some US national security officials have expressed concerns about China’s “potentially hostile ambitions” toward the pharmaceutical supply chain. The vast majority of key ingredients for drugs that many US citizens rely on, such as antibiotics, medication for blood pressure, epilepsy, and depression, are manufactured mostly in China. Although China has commented that there is little chance the government would deliberately harm the US by cutting off the flow of medications, the National Security Council is trying to identify medications most at risk if China does decide to use drug supply as leverage during negotiations. Total mortgage application volume was flat for the week, down 0.10%, according to the Mortgage Bankers Associations report. Volume was still 67.00% higher than the same week one year ago, when rates were much higher. Applications to refinance fell 4.00% for the week but were 148.00% higher annually. Mortgage applications to purchase a home increased 6.00% for the week and were 15.00% higher annually. The average loan amount on applications for purchases rose to the highest level since June and mortgage applications to purchase a newly built home surged 33.00% annually in August.

The curve has bull-steepened with UST 10-Year yield down 3.65 bps.
This Week's Events
  09/16 Empire Manufacturing 05:30 Sep 4.00 2.00 4.80 -  
  09/17 Industrial Production MoM 06:15 Aug 0.20% 0.60% -0.20% -0.10%  
  09/17 Capacity Utilization 06:15 Aug 77.60% 77.90% 77.50% -  
  09/17 NAHB Housing Market Index 07:00 Sep 66.00 68.00 66.00 67.00  
  09/17 Net Long-term TIC Flows 13:00 Jul - - $99.10b -  
  09/17 Total Net TIC Flows 13:00 Jul - - $1.70b -  
  09/18 MBA Mortgage Applications 04:00 13 Sep - -0.10% 2.00% -  
  09/18 Housing Starts 05:30 Aug 1250k 1364k 1191k 1215k  
  09/18 Housing Starts MoM 05:30 Aug 5.00% 12.30% -4.00% -1.50%  
  09/18 Building Permits 05:30 Aug 1300k 1419k 1336k 1317k  
  09/18 Building Permits MoM 05:30 Aug -1.30% 7.70% 8.40% 6.90%  
  09/18 FOMC Rate Decision (Upper Bound) 11:00 18 Sep 2.00% - 2.25% -  
  09/18 FOMC Rate Decision (Lower Bound) 11:00 18 Sep 1.75% - 2.00% -  
  09/19 Philadelphia Fed Business Outlook 05:30 Sep 10.50 - 16.80 -  
  09/19 Initial Jobless Claims 05:30 14 Sep 213k - 204k -  
  09/19 Continuing Claims 05:30 7 Sep 1672k - 1670k -  
  09/19 Bloomberg Consumer Comfort 06:45 15 Sep - - 63.20 -  
  09/19 Leading Index 07:00 Aug -0.10% - 0.50% -  
  09/19  Existing Home Sales 07:00 Aug 5.38m - 5.42m -  
  09/19 Existing Home Sales MoM 07:00 Aug -0.70% - 2.50% -  
  09/20 No Data - - - - - -
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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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