We’re excited to start featuring Guest Market Updates from David Battany, EVP Capital Markets at Guild Mortgage. David was born and raised in Boulder and earned a B.S. degree in Finance from the University of Colorado in 1985. He’s excited to periodically be featured on The Brian Manning Team Blog and to be back in Boulder…at least electronically. Welcome, David.
From The Desk of David
Stock prices are down slightly, bond prices are up, and the 10-year Treasury yield is 1.673. Two primary factors are driving the market:
Weak European Economic Data. Disappointing manufacturing data came out this morning from Germany indicating that Europe may be heading to for an economic slowdown. Brexit negotiations continue between the UK and European Union, ahead of the October 31 deadline for the UK to leave the European Union. The uncertainty about what the final terms of the Brexit negotiations will look like, and the other weak data from Germany is pulling down the German central bank bond rate to a negative 57 bps yield. The negative interest rate from Germany is causing some investors to move their money from German bonds to US Treasury bonds, which will put further pressure to lower US Treasury yields.
China Trade Negotiations. Several stories came out over the weekend concerning the US China trade negotiations. Chinese officials canceled planned trips to US farms, that had raised hopes that China would buy more US agricultural products. This caused concern that the trade talks were not going well, and this put downward pressure on stock prices and US interest rates. However, this morning China’s Ministry of Commerce reported that trade talks were going well with the US and the canceled farm visits were not related to trade discussions. This has caused a positive upward pressure on stock prices and an increased upwards pressure on US interest rates.
These upward market pressures from the China trade negotiations are offsetting the opposite direction pressures from the weak European economic data. When markets get mixed signals, like today, they will usually go with the signals based upon actual data (European manufacturing) as opposed to market signals based only upon comments from government officials.
Busy Market News Release Week. The economic releases for this week are listed below. There will be several important releases that could impact the mortgage market. On Tuesday we will have home price data and consumer confidence data. On Wednesday we will have home sales data. On Thursday we will have GDP, inflation, jobless claims, and several other economic releases. On Friday we have personal income and spending data, durable goods orders, and more inflation data. With so much key market data coming out in one week, it is possible we will see larger daily changes in mortgage prices, compared to previous weeks. If multiple releases come out both better and worse than expected on a given day, this mixed market messaging would drive intraday market volatility as investors try to decide which data to believe in as they interpret these mixed market signals, so this could also be a week with several mid-day rate sheet changes by secondary market investors. As a reminder, any news that comes out better than expected for the economy will push stock prices higher and US interest rates higher. The opposite will occur for any news that comes out worse than expected.
EVP Capital Markets, Guild Mortgage
David Battany joined Guild in 2015 and is responsible for risk analysis, trading, hedging, and new product strategy. He brings more than thirty years of experience in the mortgage industry, most recently at PennyMac, the largest non-bank correspondent lender in the United States, where he led product strategy, and more than a decade at Fannie Mae, where he led strategy for single-family business and managed lender relationships. Mr. Battany has served on the board for the California Mortgage Bankers Association (CMBA) and for the Mortgage Bankers Association (MBA), and on the board for the Residential Board of Governors for the MBA. He earned a B.S. degree in Finance from the University of Colorado in 1985.