CHM Blog

Stock indexes traded higher prior to the 9:30 am ET open. The 10 began at 3.60% +3 bps. MBS prices began the session generally steady but slightly lower.

Weekly MBA mortgage applications last week better, the composite +2.9% with purchase apps +2.0% and re-finances +4.8%.

No direct news this morning, yesterday very little movement; so far, the day is starting quietly. Markets are fundamentally confused, not sure whether the Fed will keep increasing rates or pause because of the turmoil in the banking sector. The panic is behind us unless, or until, another key bank issue is uncovered.

More on the mess in the banking system, or at least some banks. How did banks fall into the abyss and become insolvent? Poor risk management as interest rates increased against bank portfolios that bet on continued low rates, accounting changes made it less obvious. There are two ways banks can account for assets purchased; the first is mark them as assets for sale, the second is to categorize them as “hold to maturity”. In the later class no matter what the value may be at any given time since the bank will hold until they mature and as such no matter current market value it doesn’t affect the bottom line whether more or less value. There were several banks that took that avenue to disguise the losses, as long as marked hold to maturity no one knew the magnitude of potential problems until the assets had to be sold, then the crisis began.

The WSJ reported SVB Financial Group, the bank’s parent, didn’t reclassify any securities last year, and most of its bonds were labeled held-to-maturity from the get-go. That meant SVB had locked itself into a long-term bet that interest rates would stay low. The unrealized losses on those bonds at year-end were almost as large as SVB’s $16.3B of total equity. It couldn’t sell the bonds without booking losses and taking hits to capital.

At 9:30 am the DJIA opened +244, NASDAQ +139, S&P +38. 10 year at 9:30 am 3.61% +4 bps. FNMA 5.5 30 year coupon -2 bps and -9 bps from 9:30 am yesterday; the 6.0 coupon -2 bps and -2 bp from 9:30 am yesterday.

At 10 am Feb pending home sales, expected +1.0% after increasing 8.1% in Jan, as released sales increased 0.8% and the index increased to 83.2 from 82.5.

At 1 pm Treasury will auction $35B of 7 year notes; yesterday the 5 year auction was well bid, foreign buyers stepped up.

There isn’t anything on the calendar today that will impact markets. Still technically bearish.

PRICES @ 10:00 AM

10 year note: 3.59% +2 bp

5 year note: 3.68% +3 bp

2 year note: 4.08% +1 bp

30 year bond: 3.78% +1 bp

Libor Rates: 1 month 4.859%; 3 month 5.163%; 6 month 5.247%; 1 year 5.188% (3/28/23)

30 year FNMA 6.0: @9:30 101.78 -2 bp (-2 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 100.64 -2 bp (-9 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 100.83 -3 bp (-9 bp from 9:30 am yesterday)

Dollar/Yuan: $6.8884 +$0.0137

Dollar/Yen: 132.38 +1.50 yen

Dollar/Euro: $1.0850 +$0.0003

Dollar Index: 102.72 +0.29

Gold: $1966.30 -$7.20

Bitcoin: 28,427 +1,098

Crude Oil: $74.11 +$0.91

DJIA: 32,631 +236

NASDAQ: 11,872 +157

S&P 500: 4013 +41

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.