Mortgage applications jump, impeachment hearing continues, and Fed speaks

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Published Date 1/29/2020

Ahead of this afternoon's FOMC policy statement and Powell's press conference, the rate markets are slightly better. The 10 yr at 8:00 am ET 1.62% -3 bps, MBS prices +9 bps from yesterday.

Weekly MBA mortgage applications were strong last week; +7.2% on the composite, purchase applications +5.0%, refinances +8.0%.

The coronavirus continues to escalate. There are now 6,067 cases confirmed, and 132 deaths reported. Most of the deaths have been in Hubei province, where Wuhan is the capital.

The Senate will begin the first of two days questioning House managers and Donald Trump's defense lawyers, before the president's impeachment trial moves to the pivotal question of whether to call witnesses to testify. As of last night, Mitch McConnell said there were not enough votes to avoid calling witnesses. Senators are expected to vote on Friday whether to hear testimony from witnesses. If witnesses are going to occur, the vote to acquit may extend for weeks. President Trump will be acquitted unless 20 Republicans vote to oust him, and that isn't likely.

The FOMC policy statement will be this afternoon at 2:00 pm ET, and at 2:30 pm Powell's press conference. In the meantime, we do not expect any major moves in the interest markets. There'll be no change in interest rate policy. There will likely be discussions on possible changes to how they manage the US central bank's key overnight borrowing rate that has riled markets recently. The Fed still looks for 2.0% US growth this year, but the coronavirus is causing uncertainty about that outlook, with China's economy likely to suffer. The Fed does have to decide how much longer it will continue its current practice of buying $60B a month in US Treasury bonds, how to scale that program back, and what will replace it as a long-term fix for its management of short-term bank funding markets. The Fed each month is adding to its roughly $4 trillion in assets. Some policymakers would prefer the central bank to have a smaller balance sheet if possible.

At 10:00 am ET, December pending home sales were thought to be +0.4%; as released sales were down 4.9%; yr/yr +4.6%. Pending sales are signed contracts but haven't yet closed. The reaction sent stock indexes from good gains to losses.

No change, the treasury markets are improving on safety decisions over the virus, but there hasn't been much movement in MBSs compared to what many would expect. That said, mortgage rates have edged lower. Expect rates and prices to remain about where they are now until at least 2:00 pm ET to 3:00 pm ET this afternoon and then pending on how markets react to the policy statement and Powell's press conference.

Source: TBWS

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