Before the 9:30 am ET open, the stock indexes were better, and the interest rate sector essentially unchanged from yesterday’s improvement. Yesterday the 10 yr and most of the curve saw interest rates slip 4 bps (1.78% for the 10 yr) — fears about the spread of the respiratory virus called Corona is continuing to expand. The World Health Organization will decide today whether to declare the virus a public health emergency of international concern, a designation used for complex epidemics that can cross borders. Today some calm but still fear remains. It is like the SARS virus that played a key role in the pandemic 17 years ago, which killed almost 800 people and hurt economies across Asia.
Weekly MBA mortgage apps this morning saw a slip and were down 1.2% last week after increasing 30.2% the previous week. Purchase apps -2.0% dropping from an increase of 16%; refinance apps -2.0% down from +43.0%.
At 9:00 am ET Nov FHFA home price index was expected +0.3% as released +0.2%; yr/yr +4.9%.
At 9:30 am ET, the DJIA opened +57, NASDAQ +37, S&P +9. 10 yr 1.77% unchanged MBS prices +5 bps from yesterday’s close and +4 bps from 9:30 yesterday. On the open, new highs for the NASDAQ and S&P.
At 10:00 am ET, December existing home sales were expected at 5.430 MM up 1.5% from 5.350 MM in Nov. Sales increased to 5.54 MM+3.6%, +10.8% yr/yr; prices increased 7.8% yr/yr.
The Trial: The Senate voted 53-47 in the early hours this morning to set the trial procedures. 12 hours of contentious debate to quash Democrats’ attempt to subpoena documents from the administration dealing with Ukraine. The House managers may begin their 24 hours of debate, possibly today. McConnell agreed to spread the 24 hours over three days instead of two days he originally proposed, pushed by a few Republican moderates.
Chief Justice John Roberts, presiding over the trial, had to cool down the rhetoric from both sides; “It is appropriate at this point for me to admonish both the House managers and president’s counsel in equal terms to remember that they are addressing the world’s greatest deliberative body,”…”One reason it has earned that title is because its members avoid speaking in a manner and using language that is not conducive to civil discourse.”
On Trade: A representative from China’s National Development and Reform Commission said that there is no timetable for the next phase of trade talks with the US. Some are now speculating that the Phase One deal may be all there is with US/China trade issues?
President Donald Trump told CNBC on Wednesday morning that US economic growth would have been closer to 4% if it weren’t for the lingering effect of Federal Reserve rate hikes. “That was a big blip that should not have taken place. It should not have happened. But it’s one of those things. But we had Boeing. We had the big strike with General Motors. We had things happen that are very unusual to happen,” Trump told CNBC’s Joe Kernen in an interview from the World Economic Forum in Davos, Switzerland.
Our models remain bullish for the near term in treasury interest rates, but MBSs will continue to drag. The 10 yr at 1.78% is a very near term resistance level; if the 10 yr moves below 1.78% on a close, our next resistance is at 1.70%. The move to safe havens while not excessive, is continuing and is driven somewhat by investors continuing to balance portfolios against the overbought stock market.
Source: TBWS
