Yesterday the release of the advance Q1 GDP sent rates up and MBS prices lower. Inflation measured by the price deflator increased 3.1% from +1.6% in Q4. Yields across the curve increased 6 bps, the 10 year note at 4.71% but lower than the initial reaction at 4.74%, the highest rate this year. This morning at 8:30 am the March PCE +0.3% month/month as expected, year/year +2.7% against estimates of 2.6%. The core month/month forecasts +0.3%, as reported +0.3%, year/year estimates +2.7% reported at +2.8% and unchanged from February. The initial reaction wasn’t much given the report matched forecasts, the 10 year note declined 3.bps to 4.68% by 9 am, MBS prices 7 bps better than yesterday.
Also at 8:30 am, March personal income and spending, income forecasts +0.5%, reported +0.5% and up from +0.3% in February; spending thought to be +0.6%, increased +0.8% equaling February spending.
Market reaction to the data was mute, no real movement, it has been a long time since the monthly PCE inflation data has come in right on forecasts and didn’t create volatility. After yesterday’s large movements the anticipation for more volatility was widely thought. The 10 year note after breaking its two-week trading range (4.65%/4.58%) increasing to 4.74% is back in its comfort zone. No increase in inflation but no decline, year/year core inflation still well above the Fed’s 2.0% that isn’t likely to occur anytime soon unless stocks roll over or some Black Swan event happens. The initial belief at the Fed when inflation began increasing was, it is a “transitory” issue, that isn’t what it has turned out to be. The economy remains strong, income increasing consumer spending holding well, unemployment rate at historic low.
At 9:30 am the DJIA opened -11, NASDAQ +186, S&P +28. 10 year note 467% -4 bps. FNMA 6.0 30 year coupon at 9:30 am +15 bps from yesterday’s close and +22 bps from 9:30 am yesterday.
At 10 am the University of Michigan April consumer sentiment index. Expected at 77.9, declined to 77.2. All components weaker.
Next Wednesday the FOMC meeting begins, after data yesterday and today the Fed is more likely to keep the FF rate where it is, and lowering rates is way down the line. Swap traders now betting on the first rate cut in December. The economy is strong, wages are increasing, unemployment low. The equity markets by enlarge still quite bullish. Firm economy, inflation above the Fed’s target, the picture isn’t one of rate cuts coming soon.
PRICES @ 10:00 AM
10 year note: 4.65% -6 bp
5 year note: 4.68% -5 bp
2 year note: 4.98% -2 bp
30 year bond: 4.76% -5 bp
30 year FNMA 6.0: @9:30 99.24 +15 bp (+22 bp from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 100.98 +11 bp (+13 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 98.06 +13 bp (+38 bp from 9:30 am yesterday)
Dollar/Yuan: $7.2464 +$0.0069
Dollar/Yen: 156.89 +1.24 yen
Dollar/Euro: $1.0714 -$0.0017
Dollar Index: 105.81 +0.21
Gold: $2351.80 +$9.30
Bitcoin: 64,412 -265
Crude Oil: $84.04 +$0.47
DJIA: 38,216 +130
NASDAQ: 15,889 +277
S&P 500: 5096 +48
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.
Prior to the key 8:30 am ET data this morning the 10 year note at 4.66% +2 bps, MBS prices -7 bps. Trading overnight in a very narrow range, from 4.67 to 4.64%.
At 8:30 am weekly jobless claims, 215K expected, as released 207K -5 K from the prior week. After seven weeks of very little movement in claims today’s report is the lowest since February. Continuing claims declined 15K to 1.78 million, the second week in a row continuing claim have fallen. The takeaway, the employment sector is stronger than what was expected.
Q1 GDP advance releases was thought at +2.3% down from 3.4% in Q4, growth was a huge miss at 1.6%. The Atlanta Fed GDPNow that calculates growth based on each key data point that is released estimated Q1 growth at +2.7%. Is the economy slowing, or are there nuances within the data, hard to know but the miss is unusually wide. Inflation appears to be increasing according to the report, jobs continue to hold firm. The focus was on the GDP Price Deflator (inflation), it was up 3.1% versus 1.6% in the fourth quarter. That increased crushed stocks and sent interest rates higher breaking the 10 year tight trading range that had held steady for two weeks.
Jobs holding well, inflation according to the deflator increasing. The immediate reaction pushed traders to advance the potential Fed cut back to December, a month ago the first cut was thought to be coming at the June FOMC meeting. The GDP deflator isn’t where the Fed focuses, it’s the monthly PCE data that data will hit tomorrow, expectations for the March core inflation year/year 2.7% down from 2.8% in February.
At 9:30 am the DJIA opened -504, NASDAQ -345, S&P -66. 10 year at 9:30 am 4.73% +9 bps. FNMA 6.0 30 year coupon at 9:30 am -43 bps from yesterday’s close.
At 1 pm $44B of year notes will be auctioned.
This afternoon treasury will auction $44B of 7 year notes, the 2 and 5 auctions this week were decent but today’s huge miss on GDP growth and the deflator may have a positive impact on the auction. Weekly claims strong, consumer spending according to credit card companies saying spending has been strong, consumer confidence remains firm (tomorrow the University of Michigan consumer sentiment index).
10 year note: 4.73% +9 bp
5 year note: 4.75% +9 bp
2 year note: 5.03% +8 bp
30 year bond: 4.84% +7 bp
30 year FNMA 6.0: @9:30 am 99.02 -43 bp (-49 bp from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 am 100.86 -29 bp (-33 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 97.74 -53 bp (-53 bp from 9:30 am yesterday)
Dollar/Yen: 155.65 +0.30 yen
Dollar/Euro: $1.0699 unch
Dollar Index: 105.89 +0.03
Gold: $2,331.40 -$7.00
Bitcoin: 63,421 -537
Crude Oil: $82.32 -$0.49
DJIA: 37,786 -674
NASDAQ: 15,420 -291
S&P 500: 4996 -75
Yesterday the 10 year note ended unchanged for the day, MBS prices improved 12 bps. This morning the 10 year note began +5 bps to 4.66%, MBSs began -12 bps.
Weekly MBA mortgage applications declined last week, down 2.7% from the prior week, purchase apps –1.0% while re-finances declined 5.6%.
March durable goods orders expected +2.3%, increased 2.6% but February orders were revised lower, from 1.4% to 0.7%. Excluding transportation orders thought to be +0.3% increased 0.2% and February revised lower from +0.5% to +0.1%. Core capital goods forecasts was +0.2% and reported +0.2%, February capital goods also revised lower from +0.7% down to +0.4%. Looks like the February gains in orders is now erased.
This afternoon Treasury will auction $70B of 5 year notes, yesterday’s 2 year auction did better than recent treasury auctions, the demand for the $70B will be closely watched as investors have been cooling off buying US debt. Treasury rates have increased each of the last four weeks, so it is a little relief the 2 year found some interest. There is increasing belief now that the Fed is going to hold off rate cuts with inflation showing little progress, in the swap markets yesterday traders were pricing in only about 43 basis points of rate reductions for all of 2024, compared with more than six quarter-point cuts expected at the start of the year. Today’s 5 year and tomorrow’s $44B 7 year note auctions have the potential of moving markets depending on demand. Treasury auctions, as the US debt spirals higher, will be increasingly important and carry more sway in markets.
News from overseas; Bank of England official saying the decline to 2.0% inflation is way off, but that rate cuts can begin before the target is reached. The ECB saying that there needs to be conviction that inflation is slowing toward target before rate cuts start. Very slowly, and with no fanfare, comments from central bank officials are hinting rate cuts may have to be implemented prior to inflation declining to 2.0% as central banks want, so far, our Fed has been mute and officials pushed against that view.
At 9:30 am the DJIA opened -5, NASDAQ +102, S&P +13. 10 year note 4.64% +3 bps. FNMA 6.0 30 year coupon at 9:30 am -13 bps from yesterday’s close +11 bps from 9:30 am yesterday; the 6.5 30 year coupon at 9:30 am -10 bps from yesterday and +8 bp from 9:30 am yesterday.
For the last 9 days the 10 year note as essentially flat-lined in a very narrow range between 4.65% and 4.58%, 7 bps. The narrow range promises to give way on Friday when the Fed’s key inflation data, PCE, is reported. The present estimates: month/month overall +0.3% unchanged from February, year/year +2.6% up from 2.5% in February. Core inflation excluding food and energy where food prices are ignored, month/month +0.3% unchanged from February, year/year +2.7% down from 2.8% in February.
10 year note: 4.65% +4 bp
5 year note: 4.68% +4 bp
2 year note: 4.95% +4 bp
30 year bond: 4.78% +4 bp
30 year FNMA 6.0: @9:30 am 99.47 -13 bp (+11 bp from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 am 101.19 -10 bp (+8 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 98.27 -17 bp (+11 bp from 9:30 am yesterday)
Dollar/Yuan: $7.2460 -$0.0004
Dollar/Yen: 154.97 +0.14 yen
Dollar/Euro: $1.0691 -$0.0012
Dollar Index: 105.79 +0.11
Gold: $2,335.60 -$6.50
Bitcoin: 66,223 -245
Crude Oil: $82.87 -$0.49
DJIA: 38,585 -18
NASDAQ: 15,790 +94
S&P 500: 5079 +9
The 10 yield at 8 am ET 4.64% +3 bps; yesterday rates declined slightly, today focus is turning to this afternoon’s $69B 2 year note auction. Recent Treasury auctions haven’t met with strong demand concerned that rates will continue higher and the growing fiscal US deficit. Also adding to the recent tight range in rates, Friday’s PCE inflation data. The markets were hit hard when March CPI and PPI were released showing inflation edged higher with markets fully expecting to see a decline. PCE core is the Fed’s key inflation gauge, the core PCE month/month expected +0.3% unchanged from February, year/year core +2.7% down from 2.8%.
Presently the world has calmed down over the travails in the mid-east. No safety movement into US treasuries and gold under strong pressure with interest rates holding and like the bond market the recent increase in its price is eroding quickly as fear lessens. Yesterday gold declined $70.00/ounce, this morning down another $20.00. The pause between Israel and Iran, still tenuous but Iran isn’t likely to flex its muscle directly, any new upheavals will come from its surrogates, Iraq, Syria, and Lebanon.
At 9:30 am the DJIA opened +122 after increasing 254 yesterday, quarterly earnings are coming in strong. The NASDAQ opened +74, S&P +21. 10 year note at 9:30 am +3 bps to 4.64%. FNMA 6.0 30 year coupon at 9:30 am -12 bps from yesterday’s close and +6 bps from 9:30 am yesterday.
At 9:45 am the Flash April PMI indexes, the composite at 50.9, manufacturing at 49.9 down from 51.9, services also slipped from the estimate of 51.9 to 50.9. The softer data improved MBS prices from -12 bps to -1 bps, the 10 year note yield declined from 4.64% to 4.60% -1 bps on the day.
New home sales reported at 10 am, expected at 670K increased to 693K but February sales revised from 662K to 637K.
At 1 pm Treasury will kick off this week’s $183B borrowing with $69B of 2 year notes, tomorrow $70B of 5s, and Thursday $44B of 7 year notes. The demand will be closely watched with recent auctions not seeing much demand when compared to 1 year averages.
Three days until inflation data, like CPI and PPI the forecasts are that inflation didn’t increase, traders took a beating when inflation was less than estimates although not much, but the tilt was sure inflation wouldn’t increase. Since then, Fed officials have tried to say rate cuts won’t be happening soon. One Fed official commented that it wasn’t out of the picture that the Fed may have to increase rates; an outlier but why say that.
After the PMI, the 10 year yield fell 5 bps from 4.64% to 4.59%. No change in our technical outlook, still in negative territory.
10 year note: 4.59% -2 bp
5 year note: 4.62% -4 bp
2 year note: 4.94% -3 bp
30 year bond: 4.70% -1 bp
30 year FNMA 6.0: @9:30 am 99.36 -12 bp (+6 bp from 9:30 am yesterday, at 10 am MBS prices +8 bps on the session +20 bps from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 am 101.11 -5 bp (+2 bp from 9:30 am)
30 year GNMA 5.5: @9:30 am 98.16 -11 bp (+6 bp from 9:30 am yesterday)
Dollar/Yuan: $7.2464 +$0.0028
Dollar/Yen: 154.64 -0.20 yen
Dollar/Euro: $1.00702 +$0.0048
Dollar Index: 105.81 -0.27
Gold: $2,340.50 -$5.90
Bitcoin: 66,553 -49
Crude Oil: $81.79 -$0.11
DJIA: 38,402 +162
NASDAQ: 15,621 +169
S&P 500: 5052 +41
Neutral
Never underestimate the value of professional real estate agent representation
Click the link; buy a sofa. Click on another; buy a pergola for your backyard. As Realtor.com’s Margaret Heidenry agrees, we Americans can buy almost anything we want on our own with ease. All it takes is a few taps on a keyboard to “add to cart.”
But the largest purchase most people make in their lives is a home. And that purchase is so important and complex that a buyer should not go it alone.
“In 2023, about 89% of homebuyers purchased their home using a real estate agent or broker, according to the National Association of Realtors,” says Heidenry. “And while a minority might choose to buy property without professional help, doing so can be a risky move for many reasons.”
She says buying a home is not like buying a blender. The entire home buying process can take months, and if you aren’t careful, a whole lot can go wrong, costing you thousands of dollars—or even causing your dream home to slip through your fingers. It truly is the time to have a trusted professional by your side.
“Homebuyers are often spending more money than they have ever had before to purchase what is for many not only their most valuable financial asset, but also the place where they’ll spend most of their time,” says Realtor.com Chief Economist Danielle Hale. “It’s a big decision that is comprised of many smaller decisions that require specialized knowledge or research and a keen awareness of the trade-offs. It’s no surprise, then, that U.S. homebuyers widely use agents, and 9 out of 10 homebuyers say they would use a buyer’s agent again.”
In an op-ed written for the Wall Street Journal, Realtor.com’s CEO Damian Eales points out the pitfalls that homebuyers face in countries where buyers’ agents aren’t commonly used. “In Australia, where I grew up, homebuyers typically work directly with listing agents, who have a fiduciary duty only to the sellers. In some Australian territories and states, if a buyer looks at a home on a flood plain or in a region prone to bushfires, the seller’s agent isn’t necessarily obligated to tell him about the risks.”
To help highlight how a real estate agent can help homebuyers succeed in today’s highly competitive market, Heidenry offers a list of tasks these professionals handle that will make you thank your lucky stars they’ve got your back, the first of which is making sure you are shopping for a home that is financially within your reach. They are quick to tell you that the cost of a home is more than the price on the listing. Tack on closing costs, mortgage interest, taxes, insurance, utilities, yard maintenance, repairs, and homeowners association fees.
Agents are also on hand to help you prioritize and boil down your wants versus your needs. You might need three bedrooms, but you simply want a Jacuzzi. Seasoned agents know what truly matters and can impart this objective perspective on a highly emotional purchase, playing devil’s advocate as you proceed in the buying process. Consulting with a professional who sees homes every day is pivotal.
While it’s easy (and fun) to swoon over real estate listings online, real estate agents place these homes in the context of the surrounding market because they know how many homes are currently for sale for a given area, how many days it takes for them to sell, and if these properties are selling for over or under the asking price. This knowledge will help you identify if a property is overpriced, for instance, or a true bargain just waiting for a savvy buyer.
Once you spot listings you want to tour in person, your agent will take care of scheduling showings for you. It’s not as comfortable as you might think to actually be toured through a listing by the buyers themselves. They can bog you down with details of how they chose their kitchen countertops, why it would be a sin to remove their 1965 paneling, and how they can’t picture the 1944 telephone niche in the hallway going the way of the dodo.
“Your agent will be with you as you tour the house and will be able to point out the things you might not notice,” says Heidenry — like a hidden mold problem, a crack in the basement wall, or even a foundation issue.
Agents can assist you in tracking down the detailed paperwork you will undoubtedly need for the mortgage consultant — from pay stubs to a credit report. Then, they will help you find a trusted lender they may have worked with that seems to consistently come through for their clients. Many agents also have valuable insight into what type of loan you may be eligible for as well as guidance toward a down payment assistance program if you can’t quite swing the 20% down payment.
Professionals from teachers to firefighters to the military to medical staff are often not aware of all of the grants, loans, down payment, and other programs available to them based on their profession — particularly if they are first-time buyers.
Agents are super sleuths, digging into property disclosures that can tell the history of a property, from the good to the bad to the downright ugly. They know how to read between the lines and can find out if a potential home has suffered flood damage, a pest infestation, a death, or other sordid scenarios.
Anyone can tell you that negotiation is an art form. They take into account not only the listing price of a home, but also the price of comparable homes for sale in the area and how long it takes a home to sell. “Knowledge of market conditions is vital to making an offer where you don’t overpay, you don’t lowball and annoy the sellers, and you make the offer that’s just right—including how much money you can put down and when you want to close,” says Heidenry.
Multiple offers? Agents know how to play this game, understanding that properties don’t always simply go to the highest offer. Variables such as a longer closing time, the wisdom of skipping doing repairs that may arise during a home inspection, including whether to include that antique pool table in the purchase can make a big difference, protecting you in the long run.
Real estate paperwork is not the faint of heart. A real estate agent’s job is to handle documents, coordinate signatures, and get the signed paperwork to the right parties while ensuring it all gets done right. They will help you understand common contract contingencies and the importance of including protective clauses in your offer and can also assist you in ordering the home appraisal and title search. In other words, they help you cross the finish line.
Realtor, TBWS
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are getting some mild support today. The MBS market worsened by -31 bps last week. This may have been enough to increase mortgage rates or fees. The market experienced high volatility last week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) GDP and 3) Central Banks.
1) Inflation: After several rounds of higher PCE, CPI and PPI data, we have one last major report prior to next week's FOMC meeting. And that report is none other than the Fed's preferred measure of inflation, PCE and Core PCE. The PCE MOM data is expected to increase over last month's data.
2) GDP: We will get our first look at the 1st QTR GDP on Thursday. It is expected to come in the 2.5% range.
3) Central Banks: We get key interest rate decisions out of the world's #2 and #3 economies with the People's Bank of China and the Bank of Japan.
Treasury Auction: We have a record setting week of dumping our debt into the marketplace, we will need to see what the appetite is for the large supply that will hit.
04/23 2 year note
04/24 5 year note
04/25 7 year note
This Week's Potential Volatility: High
This morning markets are getting some mild support. Volatility has started low but will increase later in the week.
Bottom Line:
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
The 10 year note at 8:30 am ET improved from overnight levels, the rate at 8:30 4.64% +2 bps from Friday but down from 4.67% at 6 am.
The run to safety over the Israel/Iran conflict is slowing. Both countries breathing a little bit better and so too global markets. Last week the 10 year note, driver for rates, traded in a very narrow range from a high close at 4.65% to a low close at 4.59%.
Two keys for rates now, there is still tensions in the mid-east although not likely any peace will emerge, inflation increased earlier this month when March CPI and PPI were released, sending the 10 year note yield from 4.35% to 4.55% in just two days. Inflation still not understandable within the Fed although the two reports rattled Powell and most other Fed officials, now saying any rate cuts may have to wait until very late this year.
At 9:30 am the DJIA opened +167 after falling 211 last Friday, NASDAQ +102 after declining 320, S&P +24 from -43 last Friday. The 10 at 9:30 am 4.64% +2 bps. FNMA 6.0 30 year coupon at 9:30 -4 bps from Friday’s close and -1 bp from 9:30 am Friday.
Looking for a quiet session today, no data points. The keys this week, Treasury auctions over the next three days and PCE inflation on Friday. Short term technical indicators remain bearish. No Fed officials this week ahead of next week’s FOMC meeting.
10 year note: 4.64% +2 bp
5 year note: 4.67% unch
30 year bond: 4.74% +3 bp
30 year FNMA 6.0: @9:30 am 99.30 -4 bp (-1 bp from 9:30 am Friday)
30 year FNMA 6.5: @9:30 am 101.09 -1 bp (unch from 9:30 am Friday)
30 year GNMA 5.5: @9:30 am 98.10 -8 bp (-2 bp from 9:30 am Friday)
Dollar/Yuan: $7.2439 +$0.0041
Dollar/Yen: 154.76 +0.11 yen
Dollar/Euro: $1.0637 -$0.0020
Dollar Index: 106.34 +0.19
Gold: $2,349.30 -$64.50
Bitcoin: 66,073 +1519
Crude Oil: $82.08 -$1.01
DJIA: 38,076 +77
NASDAQ: 15,410 +128
S&P 500: 4996 +28
Israel retaliated against Iran last night. Tit for tat may have run its course, the Israeli response killed no one, the damage appears to be light and may cool things down between the two countries. Iran downplayed the attack. An Iranian military official signaled Tehran doesn’t feel compelled to react to the blasts. The reaction in markets given the soft response sent US rates lower in early trading, yesterday the 10 year note yield increased 5 bps on concerns that a serious response from Israel would come over the weekend. This morning the note yield saw volatility, on the initial report of the response the 10 year yield dropped to 4.50%, -14 bps but it lasted just a minute or two before the yield increased to 4.61% -2 bps from yesterday’s close. At 9 am MBS prices were up 9 bps from yesterday. Crude oil and gold initially spiked but by 9 am ET back to yesterday’s closing levels.
There are no economic reports today.
At 9:30 am the DJIA opened +54, NASDAQ -82, S&P -9. 10 year at 9:30 am 4.61% -3 bps. FNMA 6.0 30 year coupon at 9:30 am +5 bps from yesterday’s close and -18 bps from 9:30 am yesterday, the 6.5 coupon at 9:30 am -20 bps from 9:30 am yesterday.
The rest of the day looks to be quiet, there is a slight fear Israel will do more than it did last night but that isn’t likely. Both countries now appear to have concluded the dust up that sent markets reeling early this week. Stock indexes, gold, and crude oil all generally unchanged at 10 am as markets assess the that conflict between Israel and Iran is now completed.
10 year note: 4.62% -1 bp
5 year note: 4.67% -1 bp
2 year note: 4.99% unch
30 year bond: 4.71 -2 bp
30 year FNMA 6.0: @9:30 am 99.31 +5 bp (-18 bps from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 am 101.09 +3 bp (-20 bps from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 98.12 +8 bp (-9 bps from 9:30 am yesterday)
Dollar/Yuan: $7.2404 +$0.0022
Dollar/Yen: 154.59 -0.05 yen
Dollar/Euro: $1.0668 +$0.0024
Dollar Index: 105.92 -0.23
Gold: $2,398.40 +$0.40
Bitcoin: 64,980 +1433
Crude Oil: $82.82 +$0.09
DJIA: 37,951 +176
NASDAQ: 15,535 -67
S&P 500: 5011 unch
Overnight rates edged lower continuing the retracement yesterday, but by 8:30 am ET the 10 year note lost the momentum, the 10 year note at 8:30 am +1 bps at 4.60%, MBS price at 8:30 am -5 bps from yesterday’s close.
At 8:30 am weekly jobless claims were expected at 215K, reported at 212K leaving claims unchanged from the previous week, the 4-week average at 214.5K also unchanged from the week before. The number of people already collecting unemployment benefits in the U.S., meanwhile, edged up by 2,000 to 1.81 million.
April Philadelphia Fed business index recently has been a struggle. The index was thought to be at 2.5 from 3.2 in March, the index increased to a whopping 15.5. The index has increased for the third time over the last three months and is now the strongest since April 2022. The NE measurements over the last year, as the economy continued to grow, was lagging; a nice bounce but it won’t have an impact on markets today.
The run to safety into treasuries on Monday and Tuesday is cooling, yesterday a nice technical move, no follow-through so far this morning. Fundamentals haven’t changed, just profit-taking from traders capturing good gains as news dried up yesterday from the mid-east. The Fed can’t make it any clearer, no rate cuts coming soon with inflation holding strong, employment at historical lows, and consumer spending continuing. Powell and every other Fed official have been making it clear there is no hurry to lower rates, fearing adding to inflation. Late yesterday Fed Cleveland President Loretta Mester said monetary policy is in a good place, adding that the central bank shouldn’t be in a hurry to cut rates. And Governor Michelle Bowman noted that progress on inflation may have stalled.
At 9:30 am the DJIA opened +130, NASDAQ +23, S&P +12. 10 year note 4.61% +2 bps. FNMA 6.0 30 year coupon at 9:30 -11 bps from yesterday’s close and +12 bps from 9:30 am yesterday.
At 10 am March existing home sales, expected at 4.18 million, reported at 4.19 month/month -4.3% from 4.38 million in February, year/year -3.7%. We’ll have the specifics this afternoon.
The expected consolidation continuing, all our near-term technical indicators remain bearish.
10 year note: 4.63% +4 bp
5 year note: 4.67% +5 bp
2 year note: 4.99% +4 bp
30 year bond: 4.73% +2 bp
30 year FNMA 6.0: @9:30 am 99.49 -11 bp (+12 bp from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 am 1001.29 unch (+15 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 98.21 -6 bp (+10 bp from 9:30 am yesterday)
Dollar/Yuan: $7.2389 unch
Dollar/Yen: 154.55 +0.17 yen
Dollar/Euro: $1.0652 -$0.0022
Dollar Index: 106.10 +0.15
Gold: $2,395.90 +$7.50
Bitcoin: 62,557 +1558
Crude Oil: $82.54 -$0.15
DJIA: 37,968 +215
NASDAQ: 15,687 +3
S&P 500: 5031 +8
All information furnished has been forwarded to you and is provided by the tbwsgroup 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 the tbwsgroup 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.
Overnight a little volatility but well within the narrow range, the 10 year note hit a low of 4.64% -3 bps and a high at 4.69% +2 bps. At 8:30 am ET the note traded at 4.65% -2 bps from yesterday. MBS prices began the day +15 bps from yesterday.
This morning MBA released applications for last week, yesterday we said applications would likely decline, we were wrong. Composite applications last week increased 3.3% from the prior week, purchase apps +5.0% and re-finance apps +0.5%.
Yesterday Jerome Powell said what markets were already aware of, the Fed is a long way from lowering rates, his remarks had no direct impact on markets. The economic outlook improving according to the IMF’s most recent global forecasts; US GDP increased to +2.7% from +2.1% at its January forecast. The Atlanta Fed’s GDPNow for the Q1 shows growth in the quarter at 2.9% from 2.6% last week. The growth in the US economy continues to baffle, increasing rates don’t appear to matter in this growth spurt. The growth at least at 2.0% is in the seventh quarter, the longest growth trend going back to 2003/04.
At 9:30 am the DJIA opened +219, NASDAQ+68, S&P +22. 10 year at 9:30 am 4.62% -5 bps. FNMA 6.0 30 year coupon +26 bps from yesterday’s close and +30 bps from 9:30 am yesterday.
We reported the IMF global forecast yesterday. Here is more, the IMF really driving home the exploding fiscal debt, saying the US needs to get it under control. The debt to GDP in 2023 +8.8% up from +4.1% in 2022 even as the economy grows. The deficit, as previously noted is going to keep rates much higher than many now believe. Income down 3.1% while spending increased 1.3%.
At 1 pm Treasury will sell $13B of 20 year bonds, usually the 20 year borrowing doesn’t get much attention from traders.
At 2 pm the Fed’s Beige Book, details from the 12 Fed districts. Some tidbits but nothing new overall.
10 year note: 4.64% -3 bp (4.69% high this morning, 4.62% the low)
5 year note: 4.67% -4 bp
2 year note: 4.97% -3 bp
30 year bond: 4.75% -1 bp
30 year FNMA 6.0: @9:30 99.37 +26 bp (+30 bp from 9:30 yesterday)
30 year FNMA 6.5: @9:30 101.11 +15 bp (+21 bp from 9:30 yesterday)
30 year GNMA 5.5: @9:30 98.12 +23 bp (+25 bp from 9:30 yesterday)
Dollar/Yuan: $7.2387 +$0.0013
Dollar/Yen: 54.64 -0.09 yen
Dollar/Euro: $1.0648 +$0.0029
Dollar Index: 106.13 -0.13
Gold: $2,410.70 +$2.90
Bitcoin: 62,701 -54
Crude Oil: $84.67 -$0.60
DJIA: 37,922 +123
NASDAQ: 15,891 +26
S&P 500: 5064 +13
This morning rates under pressure, the 10 year note at 8:30 am ET +3 bp and MBS prices opened down 14 bps.
March housing starts and permits this morning were much worse than forecasts, starts were expected at 1.480 million from a revised 1.549 million (originally reported at 1.521 million). It is a 14.7% decline from February. Single-unit starts were down by double-digit percentages in every region except the West (+1.3%). Permits also plummeted, expected at 1.510 million, reported at 1.458 million, down 4.3% from February. The drop in March was the sharpest since April 2020, when starts dropped by 27% (COVID).
The IMF this morning releasing its World Economic Outlook, saying it expects the US economy to grow at a 2.7% annual rate, 0.6% higher than when the IMF projected at its January report, and 1.2% above the forecast last October. “The strong recent performance of the United States reflects robust productivity and employment growth, but also strong demand in an economy that remains overheated,” said IMF chief economist Pierre-Olivier Gourinchas. As a result, the Federal Reserve should take a gradual and cautious approach to reducing interest rates, Gourinchas said. He said he is worried about the US fiscal policy (US debt). The budget picture is “out of line with long-term fiscal sustainability” and could slow the progress on lowering inflation and raise financial stability risks, he said. “Something will have to give,” he concluded. We agree completely, US debt is going to bite hard and will keep interest rates higher than otherwise would be.
At 9:15 am March industrial production expected +0.4% was right on at 4.0%, manufacturing +0.5%, better than +0.3% estimates. March capacity utilization expected at 78.5% reported at 78.4% and February factory use revised from 78.3% to 78.2%.
At 9:30 am the DJIA opened +200 on strong earnings from banks, NASDAQ -20, S&P +1,. 10 year note at 9:30 am 4.68% +7 bps. FNMA 6.0 30 year coupon at 9:30 am -25 bps from yesterday’s close and -37 bps from 9:30 am yesterday).
The Fed is hand-cuffed, wanting to lower rates but it can’t move due to the strength in the economy that the Fed believes would add more heat to growth and further exacerbate more inflation. The first rate cut now may be in September. Traders are swiftly pushing the forecast farther back on the calendar.
The 9 day RSI at 73.74, the key is at 80 where the increase in rates will likely correct somewhat. Depends on what happens in the mid-east but it is very rare the RSI will the pivot point at 80. That should provide some momentary relief to this rapid increase recently.
10 year note: 4.68% +7 bp
5 year note: 4.69% +6 bp
2 year note: 4.97% +4 bp
30 year bond: 4.79% +7 bp
30 year FNMA 6.0: @9:30 am 99.07 -25 bp (-37 bp from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 am 100.90 -18 bp (-24 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 97.87 -24 bp (-52 bp from 9:30 am yesterday)
Dollar/Yuan: $7.2382 unch
Dollar/Yen: 154.45 +0.17 yen
Dollar/Euro: $1.0630 +$0.0005
Dollar Index: 106.19 -0.02
Gold: $2,390.60 +$7.60
Bitcoin: 62,360 -1010
Crude Oil: $85.47 +$0.05
DJIA: 37,837 +101
NASDAQ: 15,888 +2
S&P 500: 5056 -6