August 11th, 2022 9:57 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday July CPI data confirmed inflation is slowing, this morning PPI, wholesale prices, also added to inflation slowing. PPI m/m was expected +0.3%, it declined 0.5%, yr./yr. thought to be +10.3% was up just 9.8%. The core PPI (ex food and energy) expected +7.8% m/m dropped to +0.2%, yr./yr. expected +7.8% was +7.6%. Yr./yr. ex food, energy, and trade services +5.8% from +6.4% in June. The initial reaction: the 10 dropped 4 bps from yesterday and MBS prices increased 23 bps from yesterday. The decline in m/m PPI was the first time in 2 yrs., mostly due to the sharp drop in energy prices. Consumer-price data out Wednesday also showed a welcome moderation in inflation in July, largely reflecting a pullback in prices at the pump. Even so, inflation remains stubbornly high and will likely keep the Federal Reserve on an aggressive path to curb it.
Yesterday three different Fed officials commented that even with CPI lower than expected they all agreed the Fed should continue increasing the FF rate to nail down inflation. Today’s PPI likely won’t change their opinions. The debate in markets however continues to the same, some thinking the Fed won’t do 75 bps in Sept, others looking for 75. Swaps continue to imply the odds of a 50-basis-point rate increase at the Fed’s September meeting -- rather than a repeat of recent 75-basis-point increases. The 10 yr. note yield ended yesterday unchanged from Tuesday, the reaction this morning also not having much impact at the long end of the curve, but the 2 yr. and 5 yr. note yields moving lower so far.
Weekly jobless claims expected at 260K hit at 262K; the prior week reported at 260K was revised to 248K making the weekly change +14K. The 4-week average increased to 252.00K from 247.50K.
At 9:30 am ET the DJIA opened +215, NASDAQ +85, S&P +26. 10 yr. note 2.77% -2 bps. FNMA 4.5 30 yr. coupon +20 bps and +7 bps from 9:30 am yesterday. FNMA 5.0 coupon +14 bps and +16 bps from 9:30 am yesterday.
At 1 pm Treasury will auction $21B of new 30 yr. bonds.
PRICES @ 10:00 AM
10 yr note: 2.77% -1 bp
5 yr note: 2.87% -5 bp
2 Yr note: 3.15% -12 bp
30 yr bond: 3.07% +6 bp
Libor Rates: 1 mo 2.400%; 3 mo 2.922%; 6 mo 3.547%; 1 yr 3.998% (8/10/22)
30 yr FNMA 5.0: @9:30 am 102.27 +14 bp (+16 bp from 9:30 am yesterday)
30 yr FNMA 4.5: @9:30 am 101.34 +20 bp (+7 bp from 9:03 am yesterday)
30 yr GNMA 4.0: @9:30 am 101.00 +22 bp (+3 bp from 9:30 am yesterday)
Dollar/Yuan: $6.7388 +$0.0150
Dollar/Yen: 132.04 -0.84 yen
Dollar/Euro: $1.0351 +$0.0051
Dollar Index: 104.86 -0.33
Gold: $1808.90 -$4.80
Bitcoin: 24,650 +770
Crude Oil: $93.78 +$1.86
DJIA: 33,577 +267
NASDAQ: 12,953 +99
S&P 500: 4242. +32
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.