CHM Blog

At 8:30 am ET the first of four data points today; Q1 employment cost index expected +0.9% increased 1.2%, year/year 4.2% down from 4.3% in Q4. The initial reaction pushed the 10 year note yield from unchanged at 4.62% to 4.67% +5 bps and MBS prices from unchanged to -22 bps. ECI is the biggest increase since the 2022 third quarter and exceeded the forecast of economists. The Fed’s target for year/year income is at 3.0% the level prior to the pandemic. Not good news for the Fed wanting to bring inflation down and hitting the day the FOMC meeting gets underway. ECI provides a better look at employment costs because it’s a quarterly composite, rather than the monthly average hourly earnings that will be reported Friday when April employment data is reported.

At 9 am February Case/Shiller home price index, year/year expected +6.7% from 6.6% in January, increased 7.3%. The FHFA home price index month/month expected +0.1% from -0.1% increased 1.2%, year/year expected 6.5% from 6.3% in January increased 7.0%. There wasn’t any initial reaction to the higher prices but one more data point that adds to the Fed’s dilemma. Good for the housing industry though. Looks like the anticipation for lower rates coming added to the increases.

At 9:30 am the DJIA opened -151, NASDAQ -53, S&P -14. 10 year at 9:30 am 4.67% +5 bps. FNMA 6.0 30 year coupon at 9:30 am -24 bps from yesterday’s close and -27 bps from 9:30 am yesterday.

At 9:45 am April Chicago purchasing managers index, expected at 45.0 from 41.4 declined to the lowest level since August 2022 at 37.5 and one of lowest reads and on its own indicates the Chicago region is sliding quickly (any read lower that the pivot at 50 indicates contraction, there was no immediate market reaction).

At 10 am April consumer confidence index from the Conference Board, expected at 104.0 from 104.7 in March, the index 37.0. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—declined to 142.9 in April from a downwardly revised 146.8 in March. Meanwhile, the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 66.4 from a slightly upwardly revised 74.0 last month. And Expectations Index reading below 80 often signals a forthcoming recession.

FOMC tomorrow, how negative will the policy statement and Powell’s press conference impact the rate markets? No rate cuts on the horizon and the incoming data continues to confound the Fed’s outlook for inflation. If there is a rate cut coming this year it is likely to be late this year based on what we are seeing in the economy and the stall in declining inflation. Always critical to markets when FOMC meets, this one even more so.

PRICES @ 10:00 AM

10 year note: 4.76% +5 bp

5 year note: 4.71% +6 bp

2 year note: 5.02% +3 bp

30 year bond: 4.78% +4 bp

30 year FNMA 6.0: @9:30 am 99.20 -24 bp (-27 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 100.88 -19 bp (-26 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 98.13 -32 bp (-21 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2424 +$0.0034

Dollar/Yen: 157.45 +1.11 yen

Dollar/Euro: $1.0709 -$0.0013

Dollar Index: 105.94 +0.36

Gold: $2,330.60 -$36.10

Bitcoin: 60,859 -2096

Crude Oil: $82.09 -$0.56

DJIA: 38,160 -218

NASDAQ: 15,964 -19

S&P 500: 5107 -9

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.