CHM Blog

August CPI released at 8:30 am ET this morning was very much in line with forecasts. The initial reaction though as usual was volatile, the 10 year note prior to the releases traded at 4.31% +4 bps, on the release the note jumped to 4.35% where we noted yesterday is our next support level. It held and by 9 am the yield unchanged from yesterday. MBS prices declined 20 bps but within a few minutes followed the 10 year note back to unchanged from yesterday. Inflation still high, that will keep rates from declining or increasing at least until the FOMC meeting next week when no rate increase is expected.

CPI data: Overall month/month expected +0.6% was +0.6%, year/year overall CPI at 3.7% against +3.6% forecasts. The core, excluding food and energy, the more important inflation reading month/month expected +0.2% increased to 0.3% and year/year 4.3% as expected.

Overall CPI at 3.7% the highest in 14 months, but there isn’t any reason to believe the Fed will take this as serious and increase rates next week at the FOMC meeting. The core rate has increased slower, 0.2% in the prior two months. Year/year core rate declined from 4.7% in July to 4.3%.

At 9:30 am he DJIA opened +35, NASDAQ +17, S&P +5. 10 year at 9:30 am 4.29% +1 bp after the reflex increase to 4.35%. FNMA 6.0 30 year coupon at 9:30 am -1 bp from yesterday’s close and +8 bps from 9:30 am yesterday.

MBA apps down 0.8% from the prior week, purchase apps +1.0% while re-finances were down 5.4% and 31% lower than last year; purchase apps -27% from a year ago.

At 1 pm Treasury will auction $20B of 30 year bonds.

Tomorrow August PPI (producer prices) will be released, not quite as critical as CPI but still another inflation report.

Technicals hit our support levels for the 10 year note on the initial reaction to CPI at 4.35%. The rest of the session will likely be muted. Inflation still high but the fed is approaching with a wait and see attitude. Nothing in the data this morning is likely to improve MBSs but also not likely to hurt them.

PRICES @ 10:00 AM

10 year note: 4.28% unch

5 year note: 4.41% -2 bp

2 year note: 5.01% -4 bp

30 year bond: 4.25% unch

30 year FNMA 6.0: @9:30 am 99.84 -1 bp (+8 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 98.20 -5 bp (-7 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 98.60 -3 bp (-9 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2791 -$0.0131

Dollar/Yen: 147.42 +0.34 yen

Dollar/Euro: $1.0737 -0.0018

Dollar Index: 104.65 -0.06

Gold: $1936.20 +$1.10

Bitcoin: 26,099 +41

Crude Oil: $88.73 -$0.11

DJIA: 34,723 +77

NASDAQ: 13,814 +41

S&P 500: 4473 +11

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.