August 12th, 2022 9:43 AM by Richard Sardella MLO.100007700/NMLS 233568
Rate markets started strong on lower inflation on July PPI data but by mid-day selling took over. Yes, inflation is slowing but after thinking about it traders turned around realizing that 8.5% inflation in July, down from 9.1% in June is still too high for the Fed’s liking. Many still tout that the Fed will only increase the FF rate in Sept by 50 bps, while Fed officials over the last two days have essentially said the Fed has a long way to go, while not saying 75 bps will happen, they didn’t lean against it. Starting this morning the 10 yr. note and MBS prices are generally unchanged this week in a choppy trading pattern.
This morning July import prices were expected to be -0.9% as reported -1.4% m/m. yr./yr. expected +9.4% hit at 8.8% and down from 10.7% in June. Export prices were thought to be up 0.1% m/m they dropped 3.3%, yr./ expected prices increased 13.1% from 18.2%
BofA said this morning that investors are “racing” back into stocks with signs that inflation has peaked spurring bets the Federal Reserve will dial back its interest-rate hikes soon enough to keep the US economy out of a recession. US stocks saw inflows of $11 billion, the biggest in eight weeks. Rate-sensitive growth funds posted the largest influx since December, while financial stocks drew cash for a second straight week, marking a reversal after 18 weeks of outflows, the data show. Global bonds saw inflows of $11.7 billion, while $4.3 billion was pulled out of cash. As noted above, the idea that as inflation ebbs, although still very high historically, the idea the Fed will ease huge FF rate increases at the Sept meeting to +50 bps, not 75. Still, Bank of America’s own bull-and-bear indicator remains at “maximum bearish” for a ninth week in a row. Citigroup Inc. strategists said this week that the rally was also at risk from highly optimistic analyst recommendations. Another opinion from Morgan Stanley; warning for investors who are chasing the latest rally in stocks: Don’t get too excited about a potential peak in inflation after the consumer price index cooled off a bit in July.
At 9:30 am the DJIA opened +122, NASDAQ +89, S&P +21. 10y at 9:30 am 2.84% -5 bps. FNMA 4.5 30 yr. coupon +20 bps and 26 bps lower than 9:30 am yesterday. FNMA 5.0 coupon +17 bps and -19 bp lower than at 9:30 am yesterday.
At 10 am July mid-month U. of Michigan consumer sentiment index, expected at 52.2 from 51.5 in June; the index hit at 55.5.
Like yesterday the stock indexes are starting better and interest rates fractionally lower. Yesterday those improvements didn’t last more than a few hours before interest rates increased, MBS prices declined and the stock indexes ended the day generally flat.
PRICES @ 10:00 AM
10 yr note: 2 .84% -4 bp
5 yr note: 2.94% -5 bp
2 Yr note: 3.20% +1 bp
30 yr bond: 3.12% -4 bp
Libor Rates: 1 mo 2.391%; 3 mo 2.905%; 6 mo 3.489%; 1 yr 3.928% (8/11/22)
30 yr FNMA 5.0: @9:30 am 102.08 +17 bp (-26 bp from 9:03 am yesterday)
30 yr FNMA 4.5: @9:30 am 101.08 +20 bp (-19 bp from 9:03 am yesterday)
30 yr GNMA 4.0: @9:30 am 100.67 +20 bp (-33 bp from 9:30 am yesterday)
Dollar/Yuan: $6.7395 -$0.0052
Dollar/Yen: 133.51 +0.50 yen
Dollar/Euro: $1.0279 -$0.0041
Dollar Index: 105.63 +0.54
Gold: $1811.30 +$4.10
Bitcoin: 23,826 -388
Crude Oil: $92.18 -$2.16
DJIA: 33,489 +153
NASDAQ: 12,884 +104
S&P 500: 4234 +27
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.