CHM Blog

Yesterday the bellwether 10 yr. note increased 5 bps to 2.60%, MBS prices ended the session generally unchanged after trading weaker yesterday morning (-44 bps); the MBS markets showing more volatility than treasuries. This morning the 10 yr. opened at 2.56% +5 bps from yesterday then found some support and by 9 am ET 2.63% +3 bp.

The only data today, weekly jobless claims, dropped to 166K the lowest since 1968, the prior week was revised from 202K to 171K. The government’s report included annual revisions dating back to 2017. The drop in first-time applications is yet another sign of positive momentum in the labor market. Weekly unemployment claims have been falling for most of the year alongside declining Covid-19 cases and solid consumer demand that’s supporting business growth, including hiring. The four-week moving average for initial claims decreased by 8,000 to 170,000. The four-week moving average for continuing claims decreased by 35,250 to 1,541,250. The total number of continued weeks claimed for benefits in all programs for the week ending March 19 was 1,723,024, a decrease of 52,806 from the previous week. In the same week a year ago, there were 18,387,297 weekly claims filed for benefits in all programs.

Last Tuesday rate markets were roiled when Lael Brainard, a governor of the Fed and waiting for Senate confirmation as the Fed’s vice chairwoman, came out firing that the Fed was serious about increasing the FF rate and interest rates to fend off increasing inflationary pressures. Until her speech she was seen as a dove at the Fed, not ready to jump into more stringent increases in the FF rate. It had been the belief in markets from previous comments from other Fed officials that reducing the Fed’s balance sheet (another tightening move beside increasing the FF rate) would wait until the Fed completed its rate increases. Brainard, and now the FOMC minutes confirmed the reduction of the $8.9B balance sheet would begin next month. At the May 4th FOMC meeting the FF rate will be increased by 50 bps. The minutes revealed for the first time how officials expect to shrink their asset holdings much faster than they did last decade, which would serve as another key tool for tightening monetary policy. Officials neared agreement on a plan that, after a roughly three-month ramp-up, would allow up to $95B in securities to mature every month without being replaced. The plan revealed that the Fed isn’t going to sell its balance sheet, but let it run off as the debt matures.

At 9:30 am the DJIA opened -88, NASDAQ -34, S&P -7. 10 yr. at 9:30 am 2.65% +5 bps. As was the case yesterday, MBSs started better than treasuries, suggesting the panic on Tuesday was excessive in the MBS market. At 9:30 am the 4.5 30 yr. coupon +6 bps from yesterday and up 52 bps from 9:30 am yesterday.

The talk in markets over the inversion of the yield curve that dominated last week has slowed with the curve back to steepening. Last Friday the 2/10 spread was -5 bps to the 10 yr. note, this morning +18 bps to the 10 yr. Most chatter last week centered on the inversion of the curve leading to an economic recession, no one is talking about that prospect now.

There are no other scheduled releases today except Feb consumer credit data, expected at $16.6B from $6.8B in Jan.

PRICES @ 10:00 AM

10 yr note: 2.62% +2 bp

5 yr note: 2.65% -4 bp

2 Yr note: 2.43% -6 bp

30 yr bond: 2.66% +3 bp

Libor Rates: 1 mo 0.451%; 3 mo 0.986%; 6 mo 1.502%; 1 yr 2.243% (4/6/22)

30 yr FNMA 4.0: 101.08 +6 bp (+55 bp from 9:30 am yesterday)

30 yr FNMA 4.5: 102.77 +6 bp (+52 bp from 9:30 am yesterday)

30 yr GNMA 4.0: 101.55 +8 bp (+63 bp from 9:30 am yesterday)

Dollar/Yuan: $6.3609 +$0.0013

Dollar/Yen: 123.96 +0.17 yen

Dollar/Euro: $1.0915 +$0.0018

Dollar Index: 99.50 -0.10

Gold: $1935.10 +$12.00

Bitcoin: 43,682 -215

Crude Oil: $97.72 +$1.49

DJIA: 34,363 -133

NASDAQ: 13,953 +65

S&P 500: 4487 +6

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.

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