Originator Update

10 Year Treasury: 1.53%

5 Session Range: 1.53% to 1.684%

Lock Strategy:

-Floating through the weekend on any sold borrower in short term [this week]

-Floating to to see where things bottom out in long/med term [2-3 weeks]

StopLoss if bonds approach 1.60 yield;  We are trading in the middle of a wide range and have significant room to the upside & downside with the next level of strong support between 1.67% and 1.75%.  On the lower side, we could see things go to the next level of support around 1.4% yield

→ Right now, bonds are trading in the middle of a significant range with room to break either higher or lower.  With the mixed news we have been receiving from various sections of the market [IE: housing starts vs freight shipments], there is a ton of day to day volatility that has been trading sideways with a slight trend lower.

Potential Market Movers: 

Coronavirus intensifies - This is still a concern, and it is real.  This really showed itself as a big ticket economic item when the freight shipments yesterday showed massive signs of a slowdown and specifically cited the Coronavirus as one of the main reasons.  Today this is weighing heavy on traders minds and yields are plummeting to the tune of 20% [40 bps]

Other Notes: 

Inverted Yield Curve[?] - The yield curve is starting to look ‘inverted’ again, meaning that short term securities have a higher yield than long term bonds.  I mentioned this last week but still something to keep your eye on. Wall Street [equity markets] plow ahead with a stock market that can do no wrong. Seemingly every week we break records for total points and break intersession highs, but the Bond market tells a different story.  Historically the bond money has been ‘smarter’. But who has this one right is above my pay grade.

CPI Inflation - Came out much hotter than expected, beating expectations of .1% vs .5% actual.  Stripping out food and energy costs gives your Core Inflation, which still dramatically over performed 1.1% predicted vs 1.7% actual.  This would be putting pressure on rates, but the Coronavirus disruptions is outweighing the inflationary reactions.

Rate Cut Unlikely - Despite all the doom and gloom internationally, the US economy is actually performing very well as a whole.  We are undergoing extreme supply chain pressure from the West and suffering from lack of national economic expansion in Europe as well as uncertainty revolving around elections in the UK, Greece and Italy.  Even with our two biggest trading blocs bogged down, we are seeing wage growth, inflation setting in, low unemployment and increased labor force participation rates. All of this led the Federal Reserve today to come out an state a rate cut was unlikely

Housing News - Housing starts are technically down a small percentage from last month, but January was also revised higher, despite being the highest number in over a decade.  The market predicted a drop of 13% vs actual of 2.5%. Single family starts are up 21.5% Y/Y. Single family permits are up 9% M/M, and a huge 17.9% Y/Y. Maybe we will finally have some inventory to sell soon! (one can dream)

Things are uncertain right now from a rate perspective, but I would love to know what you are advising now!