CHM Blog

Yesterday’s March CPI much stronger than anticipated. The expectations were for some moderation of inflation at the CPI level. Yesterday markets and financial media had headlines that inflation “spiked” in October sending rates up 18 bps (10 year) and MBS prices down 91 bps by the end of the day. Inflation isn’t going down and the outlook is increasingly that it won’t, leading forecasts for Fed rate cuts to be revised to possibly no cuts according to some analysts and big banks.

March CPI month/month was unchanged from February, year/year did increase to 3.5% from 3.2% in February. The core month/month +0.4% unchanged from February but markets were looking for it to decline to 0.3%, year/year at 3.8% also unchanged from February but again forecasts were for a decline to 3.7%. Summing, inflation didn’t increase in March compared to February and using the word ‘spike’ to define the movement yesterday is misleading.

This morning the wholesales prices in March month/month expected +0.3% declining from +0.6% in February was reported +0.2%; year/year +2.1% up from 1.6% in February against forecasts of 2.3%. Core month/month declined from 0.3% in February to +0.2% as expected; year/year core expected +2.3% increased 2.4% and was up from 2.0% in February. Ex food, energy, and trade services month/month +0.2% down from +0.4% in February, year/year +2.8% unchanged from February.

The initial reaction saw a little improvement, the 10 year note yield yesterday, 4.55%, at 9 am 4.53%; MBS price at 9 am +9 bps from yesterday’s close.

Weekly jobless claims at 8:30 am 211K down 11K from the prior week. Continuing claims increased 28,000 to 1.817 million during the week ending March 30.

(Bloomberg comment) “Nearly everyone — from Wall Street strategists to Fed officials themselves — is being forced to, once again, reckon with signs of economic resilience and sticky consumer price pressures despite overnight interest rates more than twice as high as the putative neutral level.”

New York Fed President John Williams: “I expect inflation to continue its gradual return to 2%, although there will likely be bumps along the way, as we’ve seen in some recent inflation readings,” He commented that inflation will slow and come closer to 2.0% in 2025, in other words Williams, while not saying it, doesn’t expect rate cuts until later this year.

At 9:30 am the DJIA opened +38, NASDAQ +68, S&P +9. 10 year 4.53% -2 bps. FNMA 6.0 30 year coupon at 9:30 am +13 bps from yesterday’s close and -27 bp from 9:30 am yesterday. Yesterday MBS prices declined 91 bps.

At 1 pm Treasury will auction $27B of 30 year bonds, yesterday’s 10 year auction was awful given the conditions. Today the 30 is also likely to be weak on demand.

PRICES @ 10:00 AM

10 year note: 4.55% unch

5 year note: 4.60% -2 bp

2 year note: 4.96% -2 bp

30 year bond: 4.65% +2 bp

30 year FNMA 6.0: @9:30 99.81 +13 bp (-27 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 101.42 +10 bp (-27 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 98.74 +6 bp (-25 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2368 +$0.0029

Dollar/Yen: 153.08 -0.08 yen

Dollar/Euro: $1.0736 -$0.0009

Dollar Index: 105.18 -0.06

Gold: $2,360.90 +$12.80

Bitcoin: 69,891 -132

Crude Oil: $85.51 -$0.70

DJIA: 38,408 -53

NASDAQ: 16,231 +61

S&P 500: 5162 +1

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.