CHM Blog

The 10 yield at 8 am ET 4.64% +3 bps; yesterday rates declined slightly, today focus is turning to this afternoon’s $69B 2 year note auction. Recent Treasury auctions haven’t met with strong demand concerned that rates will continue higher and the growing fiscal US deficit. Also adding to the recent tight range in rates, Friday’s PCE inflation data. The markets were hit hard when March CPI and PPI were released showing inflation edged higher with markets fully expecting to see a decline. PCE core is the Fed’s key inflation gauge, the core PCE month/month expected +0.3% unchanged from February, year/year core +2.7% down from 2.8%.

Presently the world has calmed down over the travails in the mid-east. No safety movement into US treasuries and gold under strong pressure with interest rates holding and like the bond market the recent increase in its price is eroding quickly as fear lessens. Yesterday gold declined $70.00/ounce, this morning down another $20.00. The pause between Israel and Iran, still tenuous but Iran isn’t likely to flex its muscle directly, any new upheavals will come from its surrogates, Iraq, Syria, and Lebanon.

At 9:30 am the DJIA opened +122 after increasing 254 yesterday, quarterly earnings are coming in strong. The NASDAQ opened +74, S&P +21. 10 year note at 9:30 am +3 bps to 4.64%. FNMA 6.0 30 year coupon at 9:30 am -12 bps from yesterday’s close and +6 bps from 9:30 am yesterday.

At 9:45 am the Flash April PMI indexes, the composite at 50.9, manufacturing at 49.9 down from 51.9, services also slipped from the estimate of 51.9 to 50.9. The softer data improved MBS prices from -12 bps to -1 bps, the 10 year note yield declined from 4.64% to 4.60% -1 bps on the day.

New home sales reported at 10 am, expected at 670K increased to 693K but February sales revised from 662K to 637K.

At 1 pm Treasury will kick off this week’s $183B borrowing with $69B of 2 year notes, tomorrow $70B of 5s, and Thursday $44B of 7 year notes. The demand will be closely watched with recent auctions not seeing much demand when compared to 1 year averages.

Three days until inflation data, like CPI and PPI the forecasts are that inflation didn’t increase, traders took a beating when inflation was less than estimates although not much, but the tilt was sure inflation wouldn’t increase. Since then, Fed officials have tried to say rate cuts won’t be happening soon. One Fed official commented that it wasn’t out of the picture that the Fed may have to increase rates; an outlier but why say that.

After the PMI, the 10 year yield fell 5 bps from 4.64% to 4.59%. No change in our technical outlook, still in negative territory.

PRICES @ 10:00 AM

10 year note: 4.59% -2 bp

5 year note: 4.62% -4 bp

2 year note: 4.94% -3 bp

30 year bond: 4.70% -1 bp

30 year FNMA 6.0: @9:30 am 99.36 -12 bp (+6 bp from 9:30 am yesterday, at 10 am MBS prices +8 bps on the session +20 bps from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 101.11 -5 bp (+2 bp from 9:30 am)

30 year GNMA 5.5: @9:30 am 98.16 -11 bp (+6 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2464 +$0.0028

Dollar/Yen: 154.64 -0.20 yen

Dollar/Euro: $1.00702 +$0.0048

Dollar Index: 105.81 -0.27

Gold: $2,340.50 -$5.90

Bitcoin: 66,553 -49

Crude Oil: $81.79 -$0.11

DJIA: 38,402 +162

NASDAQ: 15,621 +169

S&P 500: 5052 +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.

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.