CHM Blog

Yesterday rates were unchanged but interday volatility was prevalent. MBS prices improved yesterday afternoon after Powell remained optimistic rate decreases would happen, saying that it is too soon to say if the higher-than-expected inflation seen in the first two months of the year is more than just a bump. He believes the economy shows continuing strong growth, but inflation is moving to 2.0%. This morning the 10 opened +2 bps from yesterday, but by 9 am ET the note traded down 2 bps to 4.34%.

Powell and the Fed may be disappointed about getting inflation down to 2.0% anytime soon. If the Fed will lower rates soon, we don’t believe they will wait for 2.0% inflation to do it. The 2.0% inflation target has long been the textbook definition of low and necessary inflation, every recent Fed chair has hung their hat on it and economics 101 asserts that anything higher will spell trouble. Powell isn’t going to fall in the trap that Paul Volker did back in the mid-eighties when he lowered rates then inflation resurrected and forced him to tighten sending the stock market into one of the worst days ever, the DJIA and S&P lost 23% in one session (Oct 19, 1987). Powell wants to lower rates as he continues to allude, but inflation may not cooperate, and he is determined to wait until he sees the white of its eyes.

Over the last few sessions rates have increased on stronger than expected economic releases (March ISM manufacturing traded positive after 16 months of the index in contraction), that news increased the 10 year note 16 bps Monday and Tuesday.

Today a parade of Fed officials speaking beginning at 12:15 pm with Richmond Fed Barkin, then Austan Goolsbee (Chicago), followed by Lorreta Mester Cleveland. After 5 pm three more officials.

Weekly jobless claims released at 8:30 am were expected at 213K, increased to 221K and the prior week revised from 210K to 212K. Continuing claims the prior week declined 19K to 1.79 mil, a testament that the labor market continues to be strong. Businesses are still hiring; layoffs are low, and unemployment sits near a 50-year bottom.

February US trade deficit was expected at -$65.5B from -$67.6B in January, the deficit increased to -$68.9B. Both exports and imports increased in February, reflecting a pickup in global trade and higher prices.

PRICES @ 10:00 AM

10 year note: 4.33% -3 bp

5 year note: 4.32% -1 bp

2 year note: 4.68% unch

30 year bond: 4.48% -3 bp

30 year FNMA 6.0: @9:30 am 100.75 +11 bp (+32 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 102.08 +9 bp 9 (+13 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 99.70 +6 bp (+38 bp from 9:30 am yesterday)

Dollar/Yuan: closed

Dollar/Yen: 151.53 -0.17 yen

Dollar/Euro: $1.0876 +$0.0040

Dollar Index: 103.97 -0.28

Gold: $2,306.30 -$8.70

Bitcoin: 67,446 +1573

Crude Oil: $85.18 -$0.25

DJIA: 39,279 +152

NASDAQ: 16,416 +138

S&P 500: 5248 +36

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.