CHM Blog

Rates declined a little yesterday after Fed chief Jerome Powell made it clear the Fed has no intentions of increasing the FF rate this year, an idea that had crept into markets over the last few weeks. The idea was fostered by NY Fed president John Williams when the made a comment in that regard last week. The key 10 year note yield declined 5 bps to 4.63% yesterday, the more sensitive 2 year note dropped 8 bps to 4.97% after breaching 5.0% on Tuesday. The 6.5 30 year FNMA coupon yesterday, its price increased 33 bps. All in all, the FOMC meeting and Powell’s press conference were about what had been anticipated. As for rate cuts coming, not likely in the next few months, Powell wants to see hard evidence inflation has peaked and headed lower. We can’t see that occurring for at least the next few months, hard evidence is not just a one-month measurement, we need a trend the Fed believes in.

Adding a little support for rates, yesterday the Fed announced it will reduce the monthly reduction to its balance sheet from $60B to $25B lessening the monthly supply that have to be absorbed and offsets the increasing monthly borrowing Treasury must raise to fund the expanding US debt that is a key concern when anticipating how low rates may decline. As the debt increases it weighs on what level rates buyers will be willing to pay for the debt. It will be measured against levels of inflation and otherwise keep rates higher than they would be if the US debt weren’t exploding. The Fed’s balance sheet currently $7.40 trillion.

Weekly jobless claims this morning was expected at 211K, claims reported at 208K which was unchanged from the prior week. Claims have flat lined the last eight weeks leading to increased speculation the data is flawed, two months of unemployment claims unchanged is rather hard to believe, yet it is what it is. Continuing claims 1,788.75 million unchanged from the prior week.

At 8:30 am Q1 productivity and unit labor costs, productivity expected +0.9% after increasing 3.2% in Q4, increased just 0.3%. Unit labor costs, always moves inversely to productivity, unit labor costs were thought to be +3.3% increased 4.7% and up from +0.4% in Q4. Kind of a hint labor costs are on the rise.

At 9:30 am the DJIA opened +240, NASDAQ +153, S&P +37. 10 year note at 9:30 am +1 bp to 4.64%. FNMA 6.5 30 year coupon at 9:30 am +8 bps from yesterday’s close and +24 bp from 9:30 am yesterday.

March US trade deficit -$60.4B against forecasts of -$69.0B and unchanged from February.

Not expecting any big improvements in rates today with tomorrows April employment data. Keys, average hourly earnings, labor participation rate, unemployment rate and jobs.

There is strong resistance for the 10 year note at 4.58% that has held the 10 year note since the beginning of April. Tomorrow’s employment data is in the very near term critical.

PRICES @ 10:00 AM

10 year note: 4.63% unch

5 year note: 4.64% -2 bp

2 year note: 4.94% -3 bp

30 year bond: 4.77% +2 bp

30 year FNMA 6.0: @9:30 am 99.48 unch (+22 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 101.17 +8 bp (+24 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 98.38 -4 bp (+26 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2389 -$0.0020

Dollar/Yen: 154.53 +0.02 yen

Dollar/Euro: $1.0684 -$0.0030

Dollar Index: 105.81 +0.06

Gold: $2,2900.40 -$10.50

Bitcoin: 59,339 +1360

Crude Oil: $78.74 -$0.26

DJIA: 37,987 +83

NASDAQ: 15,652 +47

S&P 500: 5023 +5

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.