August 21st, 2023 10:16 AM by Richard Sardella MLO.100007700/NMLS 233568
The stock indexes took a beating last week (DJIA -780, NASDAQ -344, S&P -94), 10 year note +10 bps, MBS prices -48 bps. This morning prior to the 9:30 am ET open futures trade was slightly better. Interest rates dipped a little last Friday, this morning the 10 year after declining 3 bps Friday began 5 bps higher at 4.30%.
This week’s headline is the meeting of central bankers at Jackson Hole, Wyoming. Powell scheduled to speak on Friday morning, the conference begins Thursday, we will have various interviews from attendees on Thursday. Existing and new home sales and durable goods orders and tomorrow Chicago Fed Pres Goolsbee round out the week. Not expecting any big movement in the markets until Powell speaks.
US Treasury debt over $25 Trillion, 20 years ago $3 trillion. Not only the US but most all other central bank debts have exploded. Now we have long term rates at levels not seen since 2008 financial crisis, the cost of servicing the huge borrowing can’t be sustained without Treasury having to pay massive costs to fund the debt and a reason to be concerned that long term rates will stay higher than what most thought a year ago. The pressure on debt payments will extract pain for the economy, maybe a recession; if that occurs rates will back down but nowhere close the Covid pandemic levels. Last week the 10 closed at 4.25%, the highest level since 2020 when the note traded about 1.2%. The wave of federal spending and depressed demand from America’s biggest foreign creditors will likely keep long-term rates elevated for years. It must have a negative impact on consumers that so far appear to be in decent shape, recent data shows credit card debt on the rise and with interest rate payments at or over 20% the outlook for the economy should be questioned.
At 9:30 am the DJIA opened +15, NASDAQ +55, S&P +11. 10 year note 4.32% +7 bps. FNMA 6.0 30 year coupon at 9:30 am -39 bps and -38 bps from 9:30 am Friday.
There are no scheduled reports today. Today likely to trade quietly with no new direct news that supersedes Powell’s remarks on Friday.
PRICES @ 10:00 AM
10 year note: 4.32% +7 bp
5 year note: 4.43% +4 bp
2 Year note: 4.97% +2 bp
30 year bond: 4.45% +7 bp
30 year FNMA 6.0: @9:30 98.97 -39 bp (-37 bp from 9:30 am Friday)
30 year FNMA 5.5: @9:30 97.33 -34 bp (-30 bp from 9:30 am Friday)
30 year GNMA 5.5: @9:30 97.55 -40 bp (-39 bp from 9:30 am Friday)
Dollar/Yuan: $7.2390 -$0.0426
Dollar/Yen: 146.12 +0.71 yen
Dollar/Euro: $1.0889 +$0.0016
Dollar Index: 103.39 +0.02
Gold: $1919.10 +$2.60
Bitcoin: 26,102 -193
Crude Oil: $81.90 +$0.65
DJIA: 34,463 -38
NASDAQ: 13,430 +139
S&P 500: 4391 +22
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.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.