May 11th, 2021 9:08 AM by Richard Sardella MLO.100007700/NMLS 233568
Interest rates slowly edging higher, the stock market under pressure in pre-open trade. No economic data again today.
As hard as the Fed and Treasury try to keep cool in financial markets, the inflation concerns continue to dominate in the eyes of investors and traders. Debate rages over whether the expected jump in price pressures will be enduring enough to force the Federal Reserve into tightening policy sooner than current guidance suggests. A measure of U.S. inflation expectations reached the highest level since 2006. Investors continue to sell stocks deemed too expensive after months of increases and new daily highs in the indexes. Meantime, the Fed stands firm that it will keep the Federal Funds rate at this level for the next two years. All major commodity prices continue to increase, from agriculture products to the metals markets to energy markets. It's only the lack of wage increases that is keep the level of inflation from increasing, and soon wages will have to rise. Last week, the Chamber of Commerce called on Congress to end the extra payments now, several months before they are set to expire.
Almost daily now, more are coming around to the counter view that the current help provided to the unemployed is too much, keeping many from getting back to work. A few weeks ago, only a few of us were musing; today, most see the potential roadblock for continued growth with too many people seeing little reason to work. The president pushed back yesterday against critics who say enhanced jobless benefits are discouraging Americans from working, defending his economic prescriptions. He said his administration would make clear that people can't turn down suitable jobs and keep collecting benefits, except in specific circumstances. Last Friday's lackluster employment report has fueled concerns among policymakers that a shortage of workers could restrain the pace of the recovery. U.S. employers added a seasonally adjusted 266,000 jobs in April, a sharp slowdown from the previous month and well below the one million jobs economists expected to see. Mr. Biden played down the effects of enhanced jobless benefits on the labor market yesterday, saying, "we don't see much evidence of that."
The mid-east is boiling again; Israel and Palestine's militants are launching rockets and bombs, and the situation is escalating. Markets are keeping a close eye.
At 9:30 am ET, the equity markets opened under strong selling pressure; the DJIA -265, NASDAQ -256, S&P -48. 10 yr. yield increases to 1.63% +3 bps and FNMA 2.5 30 yr. coupon -6 bps from yesterday's close and 41 bps lower than at 9:30 am yesterday.
At 10:00 am ET, March JOLTS job openings added more evidence that jobs are going wanting. Another reason for the government to curtail the extra unemployment pay that keeps many from working. The consensus was job openings at 7.455 mil, as released 8.123 mil; Feb openings revised from 7.367 mil to 7.526 mil.
At 1:00 pm ET, this afternoon Treasury will kick off its quarterly refunding with $58B of 3 yr. notes, not a factor for the long end of the curve. Tomorrow though, $41B of new 10s and on Thursday $27B of new 30s.
No matter personal opinions, inflation is set to increase, and the 10 yr. note will likely retest its high at 1.74% at the beginning of April. Last Friday, in reaction to the weak jobs report, the 10 yr. quickly fell to 1.49%, and just as quickly, it was rejected to close at 1.58% and is still increasing. Technically the reversal could be considered a key reversal. It doesn't meet all of the criteria but close enough, implying the 10 yr. will increase; the next technical support at 1.67%.
PRICES @ 10:00 AM ET
10 yr. note: 1.62% +2 bp
5 yr. note: 0.80% +2 bp
2 Yr. note: 0.16% +1 bp
30 yr. bond: 2.35% +3 bp
Libor Rates: 1 mo. 0.098%; 3 mo. 0.167%; 6 mo. 0.192%; 1 yr. 0.267% (5/10/21)
30 yr. FNMA 2.0: @9:30 100.97 -19 bp (-39 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 103.73 -16 bp (-41 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 103.13 -64 bp (-68 bp from 9:30 yesterday)
Dollar/Yuan: $6.4281 +$0.0115
Dollar/Yen: 108.56 -0.28 yen
Dollar/Euro: $1.2168 +$0.0039
Dollar Index: 90.11 -0.10
Gold: $1824.10 -$13.50
Bitcoin: 55,666 +338
Crude Oil: $64.57 -$0.34
DJIA: 34,482 -260
NASDAQ: 13,300 -101
S&P 500: 4,157 -31
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 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.