CHM Blog

One more report that adds to the concerns about the economy; weekly jobless claims this morning was expected at 200K, claims increased to 228K. The prior week revised higher, from 198K to 246K. The 4-week average of claims at 237.75K up from 198.25K the prior week. Add in ADP jobs weaker than forecast and the big decline in JOLTS job openings on Tuesday; the employment sector is slowing. Also, yesterday March ISM services sector, the strongest sector in the economy, the index and most of its components were lower that forecasts. The index at 51.2, still over 50 but weaker than 54.4 estimates.

The initial reaction to claims was muted, the 10 year note yield down just 1 bps and MBS prices unchanged from yesterday; the sensitive 2 year note also flat. Stock indexes also muted, down a few points in futures trading prior to the 9:30 am ET open. The data this week shouldn’t go unnoticed, the job markets are slowing and data like yesterday’s ISM services sector are weakening. As the data has unfolded this week economists now believe a 65% probability of a US recession and money markets see only a 44% chance the Federal Reserve will raise interest rates by 25 basis points in May. That marks a contrast to the start of the week when they had seen a 70% prospect of the hike. Now they also expect the central bank to start cutting rates as early as July. What the FOMC will do in three weeks continues to be a toss up though, with each data point the outlook swings.

The 2 year note is most sensitive to what traders believe about the Fed’s decision. Over the last 5 sessions the 2 has declined from 4.15% to 3.78% this morning.

At 9:30 am the DJIA opened -48, NASDAQ -53, S&P -9. 10 year note at 9:30 am -1 bp to 3.30%. FNMA 5.5 30 year coupon +2 bps from yesterday and -1 bp from 9:30 am yesterday; the 6.0 coupon unchanged and +3 bps from 9:30 am yesterday.

No more data today, all focus on tomorrow’s March employment data. At 10 am James Bullard, St. Louis Fed, is on the schedule. Bullard’s history is hawkish, wants higher rates, now what does he espouse?

Tomorrow’s employment data will keep markets in check, if it were not for that the rate markets would be lower in yields and MBS prices higher. Investors and traders bidding time until tomorrow, prices are slowly edging higher and the 10 year is inching lower. There isn’t any reason to expect rates will decline much the remainder of the session, markets not willing to step in front of the most volatile data each month. Based on the present estimates NFP and private jobs are expected to confirm what has been released this week. Estimates are weaker for job growth.

PRICES @ 10:00 AM

10 year note: 3.30% -1 bp

5 year note: 3.37% -1 bp

2 year note: 3.79% -2 bp

30 year bond: 3.55% -2 bp

Libor Rates: 1 month 4.890%; 3 month 5.211%; 6 month 5.292%; 1 year 5.199% (4/5/23)

30 year FNMA 6.0: @9:30 am 102.23 unch (+3 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 101.37 +2 bp (-1 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 101.28 +5 bp (+3 bp from 9:30 am yesterday)

Dollar/Yuan: $6.8766 -$0.0029

Dollar/Yen: 131.71 +0.39 yen

Dollar/Euro: $1.0897 -$0.0009

Dollar Index: 102.06 +0.21

Gold: $2025.30 $13.30

Bitcoin: 27,801 -384

Crude Oil: $79.91 -$0.70

DJIA: 33,359 -124

NASDAQ: 11,950 -46

S&P 500: 4077 -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.