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
Stocks are up slightly and bond prices are down as the markets digest the impact of Iran’s missile strikes last night against bases where US military personnel were stationed, and President Trump’s speech this morning. The markets are cautiously optimistic that both Iran and the US do not want to further escalate a military conflict. The US 10-year Treasury yield was 1.810 percent before the President’s speech this morning and immediately rose to 1.856 percent at the conclusion of the speech
US – Iran Conflict. This has been the top issue the markets have been watching for the past 48 hours. The Iranian missile strikes last night appeared to have been communicated in advance, and intended to not cause casualties. The markets appear to be interpreting this as a face-saving way for Iran to retaliate without giving the US reason to respond with further military attacks. Iran is clearly playing to two different audiences; their own citizens and the rest of the world. There have been significant protests internally in Iran in the past 12 months against the current government due to the poor economic conditions as a result of US led sanctions, as well as protests against perceived government corruption. The Iranian government has responded to these internal protests with lethal force, with many credible sources indicating that hundreds of protestors have been killed in recent months. Iran has messaged to their own citizens that the missile strikes caused massive damage and casualties to US bases, while many credible external sources indicate that Iran messaged specific advance notice of the attacks indirectly to US leaders and did not aim the missiles at buildings where they knew US troops would be located.
US – China Trade Agreement. There have been no material updates to this agreement or the previous planned signing on January 15. If tensions with Iran do deescalate, then the market will shift focus to the trade agreement as the second most key driver of stock and bond prices. The current level of stock prices today have already priced in the presumption that a deal will be signed, so if a deal falls through, stock prices will drop and bond prices will rise, causing mortgage rates to move lower.
ADP Employment Numbers. The ADP employment numbers were released this morning and showed an increase of 202,000 new jobs in December, above the market forecast of 160,000. This report created upwards pressure on stock prices and downward pressure on bond prices, however, this pressure was temporarily muted in early morning trading by the market’s focus on what President Trump would say in his scheduled speech this morning. After the President’s speech, the markets concluded that further military escalation does not appear imminent, which pushed gold and oil prices down slightly, and created the upwards pressure on stock prices as investors view of a slowly growing US economy, driven by low unemployment rates, was reinforced by today’s better than expected jobs report.
Future US Economic Outlook. Most economists are continuing to forecast slow but continued growth in the US economy for 2020. Speeches this week by Federal Reserve governors indicate they think the economy is on the right track and they see no reason to make any changes to the Fed Funds rate in the foreseeable future.
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.