Overnight the 10 yr. ran up to 0.77%, back above the pivot at 0.74%. Stock indexes trading slightly better at 8:00 am ET. MBSs opened fractionally lower (2 bps).
Over the weekend, Nancy Pelosi sent an ultimatum to Republicans
that a stimulus bill could happen before the election and will be decided by the end of this week. But it remains doubtful that the Republican-controlled Senate will accept any deal they strike. President Trump said he's ready to match the $2.2 trillion spending levels demanded by Democrats -- or go higher -- despite repeated warnings by Senate Majority Leader Mitch McConnell that most GOP senators will oppose any coronavirus relief package that big. "I want at a bigger number than she wants," Trump said of Pelosi during a campaign stop Sunday in Reno, Nevada. "That doesn't mean all the Republicans agree with me, but I think they will in the end." Pelosi says that the two sides are still haggling over language on a national plan to control the virus. Differences also remain on several key issues, including aid to states and GOP demands for an employer liability shield, that has stalled a deal for months.
McConnell is moving ahead with a $500B Republican-only plan that would renew a small business loan program and provide expanded unemployment benefits, school aid, and money for virus testing, among other provisions.
We have the election two weeks from tomorrow, but unlikely it will be finalized that evening unless the vote is a landslide for either candidate. Polls still heavily leaning toward Biden, although that was the same thing in 2016 when Clinton had a huge lead in the polls. Markets are well aware of that, and it is not likely there will be a lot of changes in equity and rate markets over the next two weeks. Barring a cataclysmic "October surprise," Trump's only obvious chance to change the race's shape will come in the final presidential debate, set for Thursday evening in Nashville. The number of Americans voting early is also surging, leaving Trump even less room to maneuver. As of Friday, more than 20 million people had cast their ballots. In an NBC News-Wall Street Journal poll released last week, for example, 47 percent of registered voters said they "strongly disapprove" of Trump's performance as president, far outnumbering the 32 percent who strongly approve.
China, where this mess began, reported its Q3 GDP at 4.9% but less than 5.5% forecasts. China clamped down hard when the virus was originally recognized in a manner most democratic countries could not because of strong government controls. China's economy has rebounded from the virus and is the only large economy forecast to recover in 2020. This could give it an advantage against neighbors over the next decade.
The political key this week is the presidential debate on Thursday. Economic releases this week are tilted to the housing sector with starts and permits and existing home sales.
At 9:30 am ET, the DJIA opened +88, NASDAQ +83, S&P +17. 10
yr. 0.77% -3 bp. FNMA 2.0 coupon at 9:30 am -2 bps from Friday’s close and -1 bp from 9:30 am Friday.
At 10:00 am ET, the October NAHB housing market index was expected at 83 as reported 85.
The 10 yr. remains technically bearish; we use 14 technical studies, and the majority are negative. That said, we don't expect any major jump in rates until at least after the election is finalized.
This Week’s Calendar:
10:00 am October NAHB housing market index Expected at 83, as released 85.
8:30 am Sept housing starts and permits (starts 1.451 mil from 1.416 mil in August; permits 1.500 mil
from 1.470 mil)
7:00 am weekly MBA mortgage applications
2:00 pm Treasury 20 yr. bond auction
Fed Beige Book
8:30 am weekly jobless claims (868K from 898K)
10:00 am Sept existing home sales (6.10 mil from 6.00 mil in August)
Sept Leading indicators (+0.7%)
9:45 am PMI Composite Flash index (54.2, manufacturing 53.2, services 54.6)
PRICES @ 9:45 AM ET
10 yr. note: 0.778% +3.5 bp
5 yr. note: 0.34 +2 bp
2 Yr. note: 0.15% +1 bp
30 yr. bond: 1.57% +4 bp
Libor Rates: 1 mo. 0.151%; 3 mo. 0.218%; 6 mo. 0.257%; 1
yr. 0.335% (10/16/20)
30 yr. FNMA 2.0: @9:30 103.16 -2 bp (-1 bp from 9:30 Friday)
30 yr. FNMA 2.5: @9:30 104.52 -2 bp (-3 bp from 9:30 Friday)
30 yr. GNMA 2.5: @9:30 104.23 unch (-6 bp from 9:03 Friday)
Dollar/Yuan: $6.6859 -$0.0017
Dollar/Yen: 105.38 -0.02 yen
Dollar/Euro: $1.1784 +$0.0067
Dollar Index: 93.28 -0.40
Gold: $1912.00 -$5.60
Crude Oil: $40.92 +$0.04
DJIA: 28,696 +90
NASDAQ: 11,766 +95
S&P 500: 3500.81 +17