CHM Blog

Last Friday the 10 year note rose 7 bps on employment data but more about the big drop in the JOLTS job openings on Thursday and weekly jobless claims. This morning the 10 continued its increases, at 9 am ET the note at 4.21% +3 bps. MBS prices began down 11 bps after declining 11 bps on Friday.

The employment situation continues to surprise with low unemployment although it ticked up in August to 3.8% from 3.5%, that was due to an increase in the labor participation rate in the employment data Friday, an increase in the number of workers looking for jobs but didn’t find one. The decline in weekly jobless claims (228K) suggests low firings. So far employment is holding strong, fueling the increasing belief the economy will not fall into recession. On the other side, average hourly earnings are slowing that may point to the pace of hirings may be easing. Goldman Sachs out saying the odds of a recession now at 15% down from 20% but Bloomberg’s consensus of a recession is at 60%.

What concerns us is whether consumers have finally run out of COVID money. Credit card debt is increasing, interest rates on credit cards well into double digits (20% +). Another worry point, inflation is still well above the Fed’s preferred target, core PCE released last Thursday at 4.2% year/year.

At 9:30 am the DJIA opened -12, NASDAQ -39, S&P -5. 10 year at 9:30 am +4 bps to 4.22%. FNMA 6.0 30 year coupon at 9:30 -13 bps from Friday's close and -22 bps from 9:30 am Friday.

At 10 am July factory orders expected -2.6% declined 2.1%.

Bank of America’s strategist Michael Hartnett pointed out last Friday the 10-year Treasury bond is on track for a third year of losses in 2023, something that hasn’t happened in 250 years of U.S. history. The return for investors putting money in the 10 year note stands at negative 0.3% so far in 2023, after a 17% slump in 2022 and a 3.9% drop in 2021. "Bond returns have suffered this year as the Federal Reserve has continued its interest-rate-hiking campaign aimed at getting inflation under control. The big picture in the 2020s vs. the 2010s is lower stock and bond returns, which we would expect to continue given political, geopolitical, social [and] economic trends,” said Hartnett.

This week is short on key data; August ISM services index on Wednesday, weekly jobless claims and Q2 productivity and unit labor costs on Thursday. July consumer credit on Friday.

PRICES @ 10:00 AM

10 year note: 4.24% +5 bp

5 year note: 4.35% +5 bp

2 year note: 4.92% +5 bp

30 year bond: 4.37% +7 bp

30 year FNMA 6.0: @9:30 am 100.02 -13 bp (-22 bp from 9:30 am Friday)

30 year FNMA 5.5: @9:30 am 98.58 -6 bp (-32 bp from 9:30 am Friday)

30 year GNMA 5.5: @9:30 am 98.86 -6 bp (-71 bp from 9:30 am Friday)

Dollar/Yuan: $7.3038 +$0.0313

Dollar/Yen: 147.58 +1.10 yen

Dollar/Euro: $1.0727 -$0.0069

Dollar Index: 104.64 +0.40

Gold: $1958.50 -$8.60

Bitcoin: 25,757 -65

Crude Oil: $87.32 +$1.76

DJIA: 34,774 -63

NASDAQ: 13,956 -76

S&P 500: 4500 -16

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.