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 with the S&P 500 currently trading close to an all-time high and MBS bond prices are down slightly from where they were yesterday morning. Most rates are down about 12.5 bps in price today. Some are flat and some are down 25 bps. The US 10-year Treasury is currently yielding 1.808% which is its highest yield in the last 30 days.
Here is what is driving the markets today as traders prepare for next week:
University of Michigan Consumer Sentiment. The October index rose to 95.5 up from September’s 93.2 but below the markets expectation of a 96.0. Although the forecast came in below expectations, the US consumers are still a large driver of the US economy, and these are still relatively high index levels. The markets are interpreting that US consumers will still continue to be spending and this will support the US economy despite weakness in some of the manufacturing data we saw earlier in the week.
Corporate Earnings. US companies continue to release their third quarter earnings, and the markets are watching this data for any hint for the future direction of the US economy. Notable companies include Amazon reporting a 26% decline in profit, however, most US companies continue to report profits above the predictions made by market analysts. This is why the S&P 500 is now trading above its previous record closing highs. As investors become more bullish on stocks, they are selling some of their bond positions and investing these funds in stocks. This slightly reduces market demand for bonds, causing bond prices to drop, and bond yields and market interest rates to rise.
Brexit. France blocked the UK’s request for an extension of a negotiated deal prior to the October 31 deadline. It is still possible an extension can be granted, and still possible a deal can be reached before the deadline, however most investors view that a deal will not happen until mid-November at the earliest.
The Fed. The markets are predicting a 25 basis point rate cut to be announced at the Fed’s meeting next week, however, since this is only a 1-day loan rate between banks, it will not impact the rates for 30-year fixed rate mortgages. There will also be market chatter regarding the Fed buying US Treasury bills and notes to help provide liquidity to the repo funding markets. These Fed purchases will mostly involve shorter term Treasuries, so this activity will have no impact on mortgage rates.
US – China Trade Negotiations. There have been no material updates today. The markets are still expecting a likely approval of a small deal in November.
Please do not hesitate to reach out to your Secondary Marketing team if you have any questions related to the markets.
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.