CHM Blog

The 10 year note continues to increase early this morning, up 2 bps at 4.64%, stock indexes fractionally better in futures trading. Treasuries are on track for a higher start, making for a continuation of their recent weakness. Treasury futures held their ground through the bulk of the night, but selling pressure began building once attention turned to action in Europe, where sovereign debt is also on the defensive. The government debt ceiling runs into a possible default unless some kind of debt extension is accomplished by Saturday night. A few months back Congress struggled with increasing the debt allowance, the reaction sent Moody’s and Fitch rating agencies to lower US debt ratings, generally ignored though, the US still the safest country for government debt.

Weekly jobless claims at 8:30 am ET expected at 211K, up 204K +2K from the prior week. Its 4-week average continues to decline, at 211K from 217.5K the prior week; very low number of job losses, indicating the economy is still on firm ground. Unemployment claims typically rise when the economy weakens, and a recession approaches.

The final read for Q2 GDP, expected at 2.3% increased at an annual rate of 2.% in the second quarter of 2023, according to the “third” estimate. In the first quarter, real GDP increased 2.2% (revised from 2.1%). The increase in the second quarter primarily reflected increases in business investment, consumer spending, and state and local government spending that were partly offset by a decrease in exports. Imports, which are a subtraction in the calculation of GDP, decreased.

Fed Chair Jerome Powell and a handful of other central bank officials are set to speak later today. Hawkish commentary from central banks has dashed hopes for a pivot toward lower rates any time soon, making September the worst month for global stocks in a year and the weakest for global bonds since February. Powell at a town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches.

At 9:30 am the DJIA opened -18, NASDAQ -59, S&P -9. 10 year at 9:30 am 4.64% +3 bps from yesterday; FNMA 6.0 30 year coupon -11 bps from yesterday’s close and -68 bps from 9:30 am yesterday.

At 10 am August pending home sales were expected at -0.1% declined 7.1% and down 18.7% year/year.

At 1 pm Treasury will complete this week’s borrowing with $37B of 7 year notes.

Comments from Fed officials and Powell’s press conference last week continue to push rates higher; meantime many economists still forecasting that the economy isn’t going to fall into recession, recent recession definitions are being changed to fit those forecasts of no recession. One support for the outlook, the low unemployment claims translating to a strong economic outlook. Pushing back on that outlook consumer data over the last month (consumer confidence from the Conference Board and U. of Michigan consumer sentiment index) have shown the consumer is not as encouraged as investors believe. Consumer debt is increasing, savings are slowing, the cost of everyday life is increasing, crude oil approaching the possibility of $100.00/barrel price.

Technically the 10 year note is as overbought, yet the momentum overall shows little sign of abating.

PRICES @ 10:00 AM

10 year note: 4.64% +3 bp

5 year note: 4.68% -2 bp

2 year note: 5.09% -5 bp

30 year bond: 4.76% +4 bp

30 year FNMA 6.0: @9:30 am 98.28 -11 bp (-68 bps from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 96.25 -13 bp (-74 bps from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 96.64 -13 bp (-68 bps from 9:30 am yesterday)

Dollar/Yuan: $7.3017 -$0.0083

Dollar/Yen: 149.36 -0.28 yen

Dollar/Euro: $1.0543 +$0.0039

Dollar Index: 106.35 -0.32

Gold: $1890.10 -$0.60

Bitcoin: 26,497 +258

Crude Oil: $92.57 -$1.11

DJIA: 33,633 +83

NASDAQ: 13,117 +24

S&P 500: 4285 +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.

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