Bloodbath in Mortgage Rates...
Market Update - Thursday - October 4, 2018 - 11:30 a.m.
Yesterday's Trend continuing
Current Price of FNMA 4% Bond: $100.12, -22bp
While we were hoping for a bounce after yesterday's dramatic selloff and price drop - unfortunately the trend is continuing today.
The Fannie Mae 30-year 4% coupon lost nearly 100bp from yesterday afternoon until this morning's opening low. The yield on the 10-year T Note hit 3.23% this morning, a 7-year high. It was 3.05% yesterday and 2.97 last week.
What is causing this? Yesterday's ADP report showed a blistering 230,000 jobs, 50,000 above expectations. This strong number give us a sense that hourly earnings / wages may even build on the 2.9% year-over-year wage growth we saw in last month's Jobs Report. And it was that hot hourly earnings number last month that started the selloff in Bonds and spike higher in rates.
On top of the strong labor market, there is simply too much good economic data holding Bonds back, so yesterday traders threw in the towel.
After hitting yet another record high yesterday for the Dow, Stocks are lower as the rate at which yields moved higher might be giving Stocks traders reason to pause the record buying spree.
Former Fed Governor Kevin Warsh said this morning that the U.S. economy is the strongest since 2004. His remarks came after the Fed's Evans said yesterday that the economy is running on all cylinders. Last night, Fed Chair Powell hinted towards higher rates down the road. All Bond negative.
With all this "good" news (*good for stocks but bad for rates) and no end in sight for the falling MBS prices, lock in and lock in soon!
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