March 21st, 2023 12:10 PM by Richard Sardella MLO.100007700/NMLS 233568
This morning the 10 year began up 9 more bps to 3.59%, MBS prices at 8:30 am ET -33 bps from Yesterday’s 28 bp decline. The FOMC starts today, nothing until tomorrow afternoon. The Fed and other central banks, and overall markets have turned the focus to deposit issues with small and regional banks away from the previous fear of inflation. Last week the ECB increased its base rate by 50 bps, concerned that if it didn’t move as was widely expected it would add to more fears of banking problems. Will the Fed do the same thing? The answer is yes, the Fed will move tomorrow.
Janet Yellen is due to speak about the crisis later today. She will say the government is ready to provide whatever is needed to guarantee deposits. She will say the government stands ready to increase the FDIC insurance if needed at other small or regional banks. She will also say the situation is stabilizing and the banking system remains sound.
The panic that ensued when SVB went under is likely over, although it is possible a couple of more banks may need relief. Not all clear but moving towards more calm.
The wider concern that is gaining momentum is that banks encouraged investors to take on much more risk, there are more debts that exceed what borrowers can pay. Is this the end of the economic boom? What we are reading is an increase in the view that with inflation roaring and lending to tighten sharply the economic outlook is becoming more of a concern, some of that does go to the present bank issues but also to the view developing that future borrowing that floats the economy may be more difficult to achieve. JPMorgan/Chase saying the first quarter will likely be the high point for stocks this year. It is saying their call is predicated on the view that bond yields will move lower along with a likely end of PMI rebound soon, as the impact of past policy tightening starts to take full effect, and the positive offsets (e.g. the cushion of COVID savings and pricing power for corporates) erode. Others believe this is the culmination of the end of stock gains, the final phase beginning with increased volatility.
Regardless of what they the Fed does tomorrow, markets now believe central banks are closer to being done with tightening than it appeared just days ago. For the Fed, traders were betting on another 110 bps of hikes before the troubles at Silicon Valley Bank. As of yesterday, that was just 35 bps.
At 9:30 am the DJIA opened +335, NASDAQ +104, S&P +39. 10 year at 9:30 am 3.58% +9 bps. FNMA 5.5 30 year coupon at 9:30 am -33 bps and -56 bps from 9:30 am yesterday; the 6.0 coupon at 9:30 am -34 bps and -46 bp from 9:30 am yesterday.
At 10 am Feb existing home sales were expected at 4.170 mil from 4.00 mil in Jan, sales reported 4.58 mil, m/m +14.5% and year/year -22.6% from -36.9% in Jan.
At 1 pm this afternoon Treasury will auction $12B of 20 year bonds (19 years, 11 months).
PRICES @ 10:00 AM
10 yr note: 3.58% +9 bp
5 yr note: 3.72% +14 bp
2 Yr note: 4.18% +18 bp
30 yr bond: 3.73% +6 bp
Libor Rates: 1 mo 4.752%; 3 mo 4.947%; 6 mo 4.849%; 1 yr 4.703% (3/20/23)
30 yr FNMA 6.0: @9:30 am 101.42 -34 bp (-46 bp from 9:30 am yesterday)
30 yr FNMA 5.5: @9:30 am 100.28 -33 bp (-56 bp from 9:30 am yesterday)
30 yr GNMA 5.5: @9:30 am 100.59 -27 bp (-47 bp from 9:30 am yesterday)
Dollar/Yuan: $6.8706 -$0.0080
Dollar/Yen: 132.28 +0.97 yen
Dollar/Euro: $1.0777 +$0.0055
Dollar Index: 103.05 -0.23
Gold: $1958.00 -$24.80
Bitcoin: 28.035 -13
Crude Oil: $69.23 +$1.59
DJIA: 32,553 +308
NASDAQ: 11,824 +148
S&P 500: 3998 +46
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.