CHM Blog

The 10 at 8:30 am ET 2.69% +4 bp, MBS prices down 22 bps. Stock indexes in futures markets had the DJIA down 78 bps, the other two key indexes have not changed much from Friday. Going into the US session more concerning news about the global economic outlooks led by weak manufacturing reports. China's Manufacturing PMI dipped back into contraction in the July reading, Japan's Manufacturing PMI expanded for the 18th month in a row, and South Korea's Manufacturing PMI fell into contraction for the first time in 22 months. Also of note, Eurozone's Manufacturing PMI returned into contractionary territory for the first time in two years in the July reading. The U.S. Dollar Index is down 0.3% at 105.59, nearing its 50-day moving average (104.93).

The prime focus this week is Friday’s July employment data. After the FOMC meeting last week there is an increase in thinking that the Fed may relax its strong push to raise interest rates to stifle inflation. Optimists now seeing the economy slowing, recession indicators that the US and global economies heading lower, now believing that will deter the Fed from huge increases in the FF rate; and further believing that next year the fed will cut rates. Tomorrow two Fed officials will weigh in, Chicago Fed Pres. Evans and St. Louis Fed Pres. Bullard (Bullard is the leading hawk at the Fed).

OPEC+ meeting Wednesday. The BOE rate decision on Thursday. Cleveland Fed Pres. Mester on Thursday.

Recent volatility in the rate markets has made trade difficult. The Fed and other central banks are ending programs that made them the dominant buyers of government debt in places such as the US, Europe, and Australia. Investors have yet to pick up the slack, helping create a liquidity drought that’s led to historic swings in yields in recent months. “Worst we have ever seen,” is how Andrew Brenner, head of international fixed income at NatAlliance Securities, characterizes conditions in the bond market. “Central banks ruined liquidity from what it used to be.” The $23 trillion US Treasuries market where the dislocations are causing the most trouble, fueling angst from investors and regulators alike about what can be done to shore up this crucial global financial linchpin.

At 9:30 am the DJIA opened -130, NASDAQ -71, S&P -24. 10 yr. at 9:30 am dropped from 2.69% to 2.64%; MBS prices at 9:30 am -6 bps after starting -22 bps.

At 9:45 am July PMI at 52.2 against 52.3 forecasts.

At 10 am July ISM manufacturing index at 52.8 against 52.2 expected. June construction spending -1.1% against +0.2% expected.

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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