Mortgages closed ~2/32nds wider to treasuries on Monday. In another slower trading session, many investors remained on the sidelines with the market rally. Origination flows increased to go over ~$8.0B on the day. At 5:00pm, the FN 30 year 2.0% (Sept) was unchanged (101-11+) and the FN 15 year 1.5% (Sept) was +2/32nds (101-18+) from the prior close. Today, the Fed is scheduled to purchase ~4.3B of UMBS 15 and 30-year securities.

Stocks opened lower Monday following disappointing economic data from China before rallying to close at another record. The DJIA closed +110.02 to 35,625.40, while the S&P 500 was +11.71 to 4,479.71. Investors will be watching today’s town hall with Fed Chair Powell for possible clues regarding tapering of the Fed bond purchase program.

Treasuries finished little changed. At the close, the 2-year was -0.25/32nds (.213) and the 10-year was +4.5/32nds (1.268).

From Elliot Eisenberg, the Bowtie Economist: Reliable Rates – With tapering of the Fed’s monthly purchases of $80 billion in Treasuries and $40 billion in mortgage-backed securities fast approaching, will this raise interest rates? Unlikely, and the primary reason is the federal budget deficit, which was $3.1 trillion in 2020, and will probably be of similar size in 2021, will shrink to $1.5 trillion in 2022. This dramatic supply reduction should more than offset the Fed’s reduced demand