CHM Blog

Overnight and early this morning the 10 year note was unchanged from yesterday at 3.35%. Data at 8:30 am ET sent the note up 4 bps back to 3.39%. Weekly jobless claims expected at 238K increased to 242%, 13K higher than the prior week, continuing claims down 38K, the 4 week average 239.25K from 235.75K. Claims the highest in six weeks. Q1 preliminary productivity and unit labor costs sent the 10 higher and MBS prices lower; productivity expected at 0.0% from Q4 declined 2.7%, lower productivity reflected in unit labor costs, expected +3.9% increased 6.3%. The takeaway is that weak productivity is feeding into elevated labor costs, which are contributing to elevated inflation and the Fed's thinking that it will have to keep rates higher for longer. More inflation data pushed the 10 to 3.39% +4 bps from yesterday, MBS prices initially held yesterday’s gains.

What was thought to be contained, problems in the banking sector, were premature, this morning PacWest Bancorp slumped as much as 48% in premarket trading after saying it’s in talks with several potential investors and First Horizon Corp. plunged as much as 55% after agreeing to terminate its merger deal with Toronto-Dominion Bank. Western Alliance Bancorp also tumbled.

The ECB met today, increasing rates by 25 bps, the expectations were for a 50 bp increase. A less aggressive stance following interpretations from Jerome Powell yesterday that the Fed could pause increases for a while. In its statement the bank didn’t provide much detail about the future of its rate increases, saying only that its decisions would be based on fresh economic data, and would aim to ensure a timely return of inflation to its 2% target. At the news conference, ECB President Christine Lagarde said the ECB wasn’t pausing its interest-rate increases, diverging from the Fed. The decision to shift to a slower pace of rate increases was “based on the understanding that we have more ground to cover, and we are not pausing,” Ms. Lagarde said.

At 9:30 am the DJIA opened -69, NASDAQ -30, S&P -11. 10 year at 9:30 am 3.40% +5 bps. FNMA 6.0 30 year coupon -14 bps from yesterday’s close and unchanged from 9:30 am yesterday.

Tomorrow April employment data. Yesterday ADP private jobs increased 296K against estimates of 143K.

Some volatility this morning, 10 began 3.35 unchanged the ran up to 3.40% and by 10 am 3.37% +2 bp; still holding below 3.40%. The stock market getting hit at 10 am, supporting interest rates as investors continue to look for safety. Investors cooling on equities as the concern of a recession increases.

PRICES @ 10:00 AM

10 year note: 3.37% +2 bp

5 year note: 3.33% +3 bp

2 year note: 3.85% +1 bp

30 year bond: 3.72% +3 bp

Libor Rates: 1 month 5.082%; 3 month 5.326%; 6 month 5.394%; 1 year 5.299% (5/3/23)

30 year FNMA 6.0: @9:30 am 101.97 +6 bp (-3 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 100.94 +3 bp (-6 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 100.59 -3 bp (-16 bp from 9:30 am yesterday)

Dollar/Yuan: $6.9178 +$0.0057

Dollar/Yen: 134.26 -0.48 yen

Dollar/Euro: $1.1022 -$0.0043

Dollar Index: 101.38 +0.04

Gold: $2045.90 +$9.30

Bitcoin: 28,800 +288

Crude Oil: $68.40 -$0.20

DJIA: 33,164 -237

NASDAQ: 11,977 -48

S&P 500: 4069 -23

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.