CHM Blog

Christine Lagarde, President of the European Central Bank in Washington for the spring meetings of the IMF and World Bank: “Resilient labor markets and strong wage growth, especially in advanced economies, suggest that underlying inflationary pressures remain strong,” Lagarde said underlying inflation remains “significantly too high”. Recent data, like in the US showing inflation at the core level remains high even with the headline, overall prices have declined but core prices (ex-food, energy, and services) are increasing. The core US CPI released on Wednesday, year/year increased from 5.5% in Feb to 5.6%. Same in Europe, overall inflation declined from 8.5% to 6.9%, but the core increased 5.7%, an all—time high. A couple ECB policymakers discussing the possibility of a 50-bps rate hike in May.

Consumers continuing to slow spending, March retail sales expected -0.4% declined 1.0%, excluding autos sales were thought to be down 0.4% as reported -0.8%. March import prices forecast -0.2% as reported -0.6%, year/year -4.6% from -1.1% in Feb. Export prices expected -0.2% month/month, reported -0.3%; year/year -4.8% from -0.8% in Feb.

March industrial production at +0.4% was better than 0.3% estimates, manufacturing slipped to -0.5% against -0.1% but Feb revised to +0.6% from the +0.1% originally reported. Capacity utilization saw a big increase in factory use, at 79.8% compared to 78.8% estimates although Feb revised from 78.0% to 79.6%.

Fed governor Christopher Waller speaking; “Monetary policy needs to be tightened further,”… “I would welcome signs of moderating demand, but until they appear, and I see inflation moving meaningfully and persistently down toward our 2% target, I believe there is still more work to do.” Waller pointed to stronger-than-anticipated economic activity so far this year and stubbornly high inflation in concluding that the outlook currently supported tighter monetary policy. “Monetary policy will need to remain tight for a substantial period of time and longer than markets anticipate.” Other Fed officials have suggested a pause at the May FOMC meeting.

Chicago Fed President Austin Goolsbee; saying tighter credit conditions stemming from the recent banking turmoil could help the US central bank in its effort to bring down inflation, “We’ve still got several weeks before the FOMC meeting, so I don’t want to specify to the basis point what is that going to mean for what I would be for at the FOMC meeting, because I still want to see the data,”… “But let’s just be mindful that we’ve raised a lot, it takes time for that to work its way through the system.”

At 9:30 am the DJIA opened -27, NASDAQ -42, S&P -4. 10 year 3.49% +4 bps. FNMA 5.5 30 year coupon at 9:30 am -28 bps and -36 bps from 9:30 am yesterday; 6.0 coupon -20 bps and -30 bps from 9:30 am yesterday.

At 10 am the mid-month U. of Michigan consumer sentiment index thought to be 62.7 up from 62.0 in February. The index leaped to 63.5.

Whether the FOMC increases 25 bps at the next meeting or pauses rates will focus on inflation readings. Inflation still too high according to all central bankers. The next two weeks will likely keep rates churning, no significant movements, just choppy.

PRICES @ 10:00 AM

10 year note: 3.51% +6 bp

5 year note: 3.61% +11 bp

2 year note: 4.12% +14 bp

30 year bond: 3.72% +4 bp

Libor Rates: 1 month 4.948%; 3 month 5.260%; 6 month 5.306%; 1 year 5.286% (4/13/23)

30 year FNMA 6.0: @9:30 am 101.84 -20 bp ( -30 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 100.73 -28 bp (-36 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 100.66 -27 bp (-32 bp from 9:30 am yesterday)

Dollar/Yuan: $6.8581 -$0.0108

Dollar/Yen: 133.06 +0.49 yen

Dollar/Euro: $1.1024 -$0.0033

Dollar Index: 101.28 +0.27

Gold: $2037.10 -$18.20

Bitcoin: 30,748 +437

Crude Oil: $83.00 +$0.84

DJIA: 34,020 -8

NASDAQ: 12,197 +31

S&P 500: 4160 +14

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.