CHM Blog

If there was any doubt about the Fed’s plan to lower rates in 2024 it was laid to rest yesterday. The pivot, as it is presently referred to, sent rates falling hard yesterday afternoon, the 10 year note rate dropped 20 bps to 4.01%, MBS prices increased 62 bps on the 6.0 30 year coupon, +35 bps on the 6.5 coupon. The 10 ended yesterday at 4.01%, overnight the yield fell to 3.92%, by 8:45 am ET this morning the note traded at 3.97% -5 bps. MBS price at 8:45 am +19 bps from yesterday’s close.

Data at 8:30 am: weekly jobless claims that were thought to be at 223K, but claims declined to 202K -19K for the week, the lowest level in over a month; the 4 week average at 213.25K down from 221K. November retail sales were better than forecasts +0.3% with forecasts of -0.1%; excluding vehicles sales expected -0.1% increased 0.2%, when vehicles and the cost of gas are factored sales were thought to be +0.1% but increased 0.6%. November import prices expected +0.7% declined 0.4% month/month, year/year import prices fell 1.4%. Export prices forecast at -1.0% declined 0.9% month/month, year/year -5.2%. The market reaction pushed the 10 year note up a little but still down 5 bps.

The declines in rates yesterday were more than we expected, and deeper than the consensus was thinking prior to the FOMC and Powell. Thought the Fed would be more conservative in what would be conveyed. Markets were expecting rate cuts next year, rates and prices reflected lower rates, yesterday the sum of all Fed comments and Powell’s press conference confirmed the potential of a series of cuts in 2024. The Fed’s projections for core inflation revised from 2.6% to 2.4% in 2024. The first rate cut next year should come in June, there are many though that are looking for the first cut as early as March. How many cuts? That is the focus presently, there is a contingent that expects six cuts, too many in our view; looking for four cuts is more realistic. “The Fed pivot is officially in and the market continues to digest the news,” said Brad Bechtel at Jefferies. “The dots imply 75bps of cuts and the market is currently showing around 140bps of cuts, so that still needs to be reconciled. Powell had a chance to push back on market pricing and definitively did not take it.”

The ECB kept its key interest rates unchanged; the Bank of England, Swiss National Bank, and Hong Kong Monetary Authority left their key policy rates unchanged. BofE rate at 5.25%, Swiss 1.75%. The ECB will also keep rates unchanged.

At 9:30 am the DJIA opened +32, NASDAQ +73, S&P +24. 10 year note at 9:30 am 3.97% -5 bps. FNMA 6.5 30 year coupon at 9:30 am +10 bps from yesterday’s close and +31 bp from 9:30 am yesterday; the 6.0 30 year coupon -3 bps from yesterday’s close and +42 bps from 9:30 am yesterday.

The dollar declining this morning as rate outlooks lessen. Check out the gold price.

Nothing left on the calendar today.

The outlook in 2024 a much better year than this one. 30 year mortgages should decline early next year opening up inventories and increasing affordability that kept many buyers on the sidelines. The 10 year note cutting easily below 4.00% that we expected to be a struggle after yesterday’s very strong improvement; it cut through it hardly blinking.

PRICES @ 10:00 AM

10 year note: 3.96% -6 bp

5 year note: 3.90% -7 bp

2 year note: 4.36% -7 bp

30 year bond: 4.11% -7 bp

30 year FNMA 6.5: @9:30 am 102.40 +10 bp (+30 bp from 9:30 am yesterday)

30 year FNMA 6.0: @9:30 am 101.38 -3 bp (+42 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 100.77 +19 bp

Dollar/Yuan: $7.1250 -$0.483

Dollar/Yen: 141.73 -1.16 yen

Dollar/Euro: $1.0978 +$0.0103

Dollar Index: 102.19 -0.68

Gold: $2061.20 +63.90

Bitcoin: 42,533 -482

Crude Oil: $71.83 +$2.36

DJIA: 37,187 +97

NASDAQ: 14,814 +77

S&P 500: 4729 +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.

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.