CHM Blog

Two data points at 8:30 am ET this morning, both slightly encouraging those that hope the Fed will not increase rates in three weeks.

Weekly jobless claims expected at 233K were reported at 239K and up 11K from the prior week, the 4-week average of claims at 240.0K from 237.75K the week before. Claims have been edging higher over the two months but today’s claims the first increase in three weeks.

March producer prices released at 8:30 am were softer than forecasts. PPI month/month expected 0.0% from -0.1% in April, declined 0.5%, year/year 2.7% from 4.6% in April. Core PPI expected 0.3% month/month, down 0.1%, year/year core PPI (ex-food and energy) +3.4% from 4.4%. Excluding food, energy and trade services month/month +0.1% from +0.2%, year/year +3.6% from +4.4%. A much softer inflation report than had been thought.

Rate markets didn’t show much movement on the weaker data, the 10 stayed unchanged until 9 am and initial MBS prices were slightly lower. By 9 am though the 10 declined 2 bps from yesterday and MBS prices up just 2 bps. Yesterday’s CPI also slowed month to month, year/year; the fly in the soup was the year/year core, at +5.6% was up from 5.5% in April.

The reaction to the data in markets was very subdued. The focus still on what the Fed will do at the may meeting, swap markets continue to expect a 25 bp increase in the FF rate. Yesterday the FOMC minutes were released; The minutes showed that the Fed expectations for rate hikes this year after a series of bank collapses roiled markets, the Fed would remain vigilant for the potential of a credit crunch to further slow the economy. Officials forecast a “mild recession” starting later this year “given their assessment of the potential economic effects of the recent banking-sector developments.” This morning and yesterday confirmed inflation is slowing a little more rapidly than the forecasts.

At 9:30 am the DJIA opened +60, NASDAQ +69, S&P +11. 10 year at 3.39% -1 bp. FNMA 5.5 30 year coupon +13 bp, +10 bp from 9:30 am yesterday; the 5.0 coupon -5 bps and -6 bp from 9:30 am yesterday.

Looks like the yield curve is beginning to flatten a little, the difference between the 10 year note and the 2 year a month ago was about 100 bps. This morning the spread at 54 bps. Increasing belief that the rate cuts are in the offing, (later this year). For the near-term swaps showing an 80% cut by the Fed next month; swap pricing expectations for the effective fed funds rate in December to be nearly a half point below the current 4.83% level, a deeper degree of easing than anticipated late Tuesday before the CPI and PPI.

At 1 pm Treasury will auction $18B of 30 year bonds (29 year, 9 months).

Investors and traders not doing much so far; PPI didn’t move markets, trading in narrow ranges. Inflation lower but still a rate increase is being built into current levels.

PRICES @ 10:00 AM

10 year note: 3.39% -1 bp

5 year note: 3.44% -2 bp

2 year note: 3.93% -3 bp

30 year bond: 3.63 unch

Libor Rates: 1 month 4.946%; 3 month 5.251%; 6 month 5.242%; 1 year 5.366% (4/12/23)

30 year FNMA 6.0: @9:30 am 102.00 -5 bp (-6 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 101.09 +6 bp (+3 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 100.98 +6 bp (+4 bp from 9:30 am yesterday)

Dollar/Yuan: $6.8694 -$0.0054

Dollar/Yen: 132.15 -1.01 yen

Dollar/Euro: $1.1063 +$0.0071

Dollar Index: 100.87 -0.63

Gold: $2058.60 +$33.80

Bitcoin: 30,212 +250

Crude Oil: $82.90 -$0.36

DJIA: 33,670 +23

NASDAQ: 12,060 +131

S&P 500: 4108 +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.