CHM Blog

The Fed did what was expected, increased the FF rate by 25 bps. The Bank of England followed suit, raised its key interest rate by a quarter percentage point this morning adding to the central bank themes of reducing inflation with worrying about the banking system. The Bank of England saying its banking system “remains resilient” and said it may keep on increasing as long as inflation continues to pressure its economy. The rate now the highest since the financial meltdown of 2008. Last week the ECB went 50 bps. There was a meeting of central banks today, the Basel Committee, they said “Years of unprecedentedly low interest rates underpinned the build-up of leverage across household and corporate sectors.” They continued. “As most central banks raise interest rates to combat inflation, borrowers are now facing sharply rising debt service burdens. A broad-based repricing in asset markets could also expose banks to additional risks.”

Weekly jobless claims this morning generally on target, 191K claims down 1K from the prior week. The 4 week average 196.25 from 196.50K

The dollar took a hard hit yesterday on the rate increase sending gold and other commodities higher. Gold on a roll, increased $29.00 yesterday, this morning in early trading up another $22.00. Soft dollar and safety moves underpin the commodity, crude a little lower this morning.

In other news: Goldman Sachs Group strategists saying American households will sell $750B of stocks this year as savings slow and interest rates are high. Households will instead boost allocation to credit and money-market assets. In 2022 households according to GS research held 38% of the total US equity market. US equity mutual funds and exchange traded funds have seen withdrawals of $51 billion this year, while bond funds have received $137 billion, according to Goldman citing high-frequency flow data.

At 9:30 am the DJIA opened +177 after falling 530 yesterday, NASDAQ opened +154, S&P +34. 10 year at 9:30 am 3.48% +3 bp. FNMA 6.0 30 year +13 bps from yesterday and +51 bp from 9:30 am yesterday; the 5.5 coupon +14 bps and +73 bp from 9:30 am yesterday.

At 10 am, a few minutes ago, Feb new home sales expected at 645K from 670K, increased 640K and Jan revised a lot lower, from 670K to 633K.

The 10 still has very strong resistance at 3.40%, no matter what you throw at it, it still has ended any buying when it approaches the resistance. Yesterday the note yield declined 16 bps on the Fed increasing just 25 bps and implied further increases will depend on the banking system and economic conditions. Powell didn’t deviate, nor has any other central bank the last few days, inflation must be brought down. Looking for less wage increases, slower economic growth, and stability in the lending community.

PRICES @ 10:00 AM

S&P 500: 3978 +41

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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