CHM Blog

Yesterday Fed Governor Lael Brainard, set the interest rates spinning higher in her comments in a speech that had a much more aggressive outlook for Fed tightening. She made it clear that at the May 4th FOMC meeting the Fed will announce its plans to begin unwinding its $8.9B balance sheet. It has been on the table for a few months but until yesterday no Fed official had made it a fact that will be delineated at the meeting. She made strong comments that inflation was getting too high and essentially confirmed without saying so that the Fed will increase the pace of increasing the FF rate more than Powell had been saying until a couple of weeks ago. What made her remarks, so impacting is that she has been mostly a dove within the Fed, her speech yesterday added more emphasis because of her prior stance.

This morning the selling continues, the 10 yr. increased to 2.63%, up 7 more basis points from 15 bp increase yesterday. MBS prices at 8:30 am ET -44 bps from yesterday’s 86 bp decline. This afternoon at 2 pm the minutes from the March 16th FOMC will be released, after Brainard’s comments yesterday the minutes, always interesting, will be more so today. The minutes will unveil details of its likely plans to shrink its massive balance sheet. Fed Chair Jerome Powell promised “a more detailed discussion” of the $8.9 trillion balance sheet laying out “pretty much the parameters of what we’re looking at,” in his comments during a press conference following the March 15-16. The pace of reducing the balance sheet will likely be at a faster than when the Fed reduced its balance sheet back in 2017 and 2019. Surging inflation accelerated plans to reduce the balance sheet, viewed as a passive way to tighten monetary policy that supplements increases in interest rates. Powell said the reduction “might be the equivalent of another rate increase.”

Weekly MBA mortgage applications released this morning, another weekly decline; the composite -6.3%, purchase apps dropped 3.0% and re-finance apps were down 10.0%.

At 9:30 am the DJIA opened -252, NASDAQ -179, S&P -37. 10 yr. at 9:30 am 2.64% +8 bps. FNMA 4.5 30 yr. coupon at 9:30 am -44 bps from yesterday and -84 bps from 9:30 am yesterday.

PRICES @ 10:00 AM

10 yr note: 2.63% +7 bp

5 yr note: 2.75% +7 bp

2 Yr note: 2.54% + 1 bp

30 yr bond: 2.66% +8 bp

Libor Rates: 1 mo 0.446%; 3 mo 0.967%; 6 mo 1.475%; 1 yr 2.228% (4/6/22)

30 yr FNMA 4.0: 100.53 -41 bp (-87 bp from 9:30 yesterday)

30 yr FNMA 4.5: 102.25 -44 bp (-84 bp from 9:30 yesterday)

30 yr GNMA 4.0: 100.92 -37 bp (-75 bp from 9:30 yesterday)

Dollar/Yuan: $6.3589 -$0.0049

Dollar/Yen: 123.86 +0.27 yen

Dollar/Euro: $1.0924 +$0.0020

Dollar Index: 99.45 -0.02

Gold: $1,931 +$4.10

Bitcoin: 44,291 -1416

Crude Oil: $101.41 -$0.58

DJIA: 34,388 -253

NASDAQ: 13,877 -327

S&P 500: 4466 -58

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.