CHM Blog

Yesterday a surprising increase in Q2 advance GDP that was thought to be +1.5% but hit +2.4%, a huge miss and increase in growth. The 10 year note increased 14 bps, MBS prices fell 6 bps.

This morning more key data, June PCE expected +0.4% increased 0.3%, May PCE revised from +0.4% to +0.5%; year/year expected +3.0% and met the forecasts. Core PCE expected +0.2% as was reported, year/year thought to be 4.2% was 4.1%, but down from 4.6% in May. June personal income up 0.3% against +0.4% and down from +0.5% in May. Personal spending increased 0.5% against 0.4% forecasts, may spending revised to +0.2% from +0.1%.

Q2 employment cost index thought to be +1.1% reported +1.0%; year/year 4.5% down from 4.8% in Q1. Seasonally adjusted, for the three-month period ending in June 2023 versus a 1.2% increase for the three-month period ending in March 2023.

Prior to the 8:30 am data the 10 year note traded down 4 bps to 3.96%, at 9 am -3 bp, MBS prices began the day +17 bps.

The Bank of Japan surprised markets by loosening bond yields. The BOJ kept its target for 10-year yields at around 0% but said its 0.5% ceiling was now a reference point, not a rigid limit as it sought to make its ultra-loose monetary policy program more flexible. The bank said it will offer to buy 10-year debt at 1% each day, suggesting an effective doubling of the movement range for yields. The latest forecasts released with the decision show that while the BOJ now sees inflation averaging well over 2% this year, it predicts it will weaken below the target in the next fiscal year.

Yesterday the Q2 advance GDP, well above forecasts re-ignited the fears of more Fed tightening, this morning the data cooled that thought. PCE inflation soft, Q2 employment costs a little lower.

At 9:30 am the DJIA opened +206 (yesterday broke the string of daily increases going back 126 years), NASDAQ opened +151, S&P +35. 10 year at 9:30 am 3.98% -2 bp. FNMA 6.0 30 year coupon at 9:30 am +17 bp and -30 bps from 9:30 am yesterday.

At 10 am the final July University of Michigan consumer sentiment index expected unchanged from mid-month at 72.6; the index 71.6. Consumers still strong.

The 10 year note still holding most of yesterday’s increase. Powell’s favorite inflation focus this morning, core year/year down to 4.1% from 4.6% in May; yesterday Q2 GDP increased 2.4% with forecasts at 1.5%. It poses a short-term conundrum, so far markets are not showing much reaction to the lower inflation data.

PRICES @ 10:00 AM

10 year note: 3.98% -2 bp

5 year note: 4.21% -3 bp

2 year note: 4.91% -2 bp

30 year bond: 4.04% unch

30 year FNMA 6.0: @9:30 am 100.45 +13 bp (-30 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 99.03 +11 bp (-31 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 99.23 +17 bp (-33 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1539 -$0.0203

Dollar/Yen: 140.58 +1.08 yen

Dollar/Euro: $1.1003 +$0.0024

Dollar Index: 101.72 -0.06

Gold: $1955.20 +$9.50

Bitcoin: 29,289 +172

Crude Oil: $79.23 -$0.86

DJIA: 35,430 +147

NASDAQ: 14,260 +210

S&P 500: 4577 +40

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.