CHM Blog

At 8 am ET the 10 year note traded at 4.26% +6 bps and MBSs began -35 bps. Pressure likely driven by Fitch warning that the banking sector is at risk of a downgrade just a week after Moody's warned about a similar possibility.

A week ago, Moody’s Ratings announced it was downgrading US Treasury debt from AAA to AA+ and 10 regional banks with 11 more on its watch list. At the time Jamie Dimon and Warren Buffett said it didn’t matter, US debt was the safest in the world, of that there is no doubt. Now the agency is warning more downgrades may occur, including JP Morgan/Chase. Another one-notch downgrade of the industry’s score, to A+ from AA-, would force Fitch to reevaluate ratings on each of the more than 70 U.S. banks it covers, Wolfe told CNBC in an exclusive interview at the firm’s New York headquarters. “If we were to move it to A+, then that would recalibrate all our financial measures and would probably translate into negative rating actions,” Wolfe said. Earlier this month, the rating agency downgraded the U.S. long-term credit rating because of political dysfunction and growing debt loads. Fitch is intent on signaling to the market that bank downgrades, while not a foregone conclusion, are a real risk, said Wolfe.

At 8:30 am July retails much stronger than thought, the best since January. Expected +0.4% sales increased 0.7%, ex vehicles expected +0.4% increased 1.0%. July import and export prices, month/month expected +0.2% increased 0.4%, year/year expected -4.6% was higher at -4.4%. Export prices expected +0.1% month/month increased 0.7%, year/year at -7.9% compared to -11.9% in June. The NY Empire Sate manufacturing index for August, thought to be -0.4% dropped 19.0%.

At 9:30 am the DJIA opened -133, NASDAQ -41, S&P -18. 10 year note after topping at 4.27% (+7 bps) early this morning traded unchanged at 4.20%. FNMA 6.0 30 year coupon at 9:30 am -5 bps from yesterday’s close and -10 bps from 9:30 am yesterday.

At 10 am August NAHB housing market index, expected unchanged at 56 declined to 50. Current condition -5 points to 57, sales expectations -4 to 55, buyer traffic -6 to 34.

The debate continues within markets about what the Fed is thinking and what it may do with interest rates moving forward. On August 24th the annual Jackson Hole symposium, always interesting, the potential of more clarity from J Powell may provide more specifics.

At its highest this morning the 10 year note climbed to the highest since last October before recovering quickly once traders re-thought the news from Fitch. Volatility in the rate markets remains high, evident this morning. Since last Thursday (3 days) the yield on the note has increased from 3.96% to 4.21% at 10 am this morning.

PRICES @ 10:00 AM

10 year note: 4.19% -1 bp (4.27% was this morning’s high)

5 year note: 4.33% -4 bp

2 year note: 4.93% -4 bp

30 year bond: 4.30% +2 bp

30 year FNMA 6.0: @9:30 am 99.53 -5 bp (-10 b p from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 97.94 -9 bp (-12 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 98.11 -11 bp (-14 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2847 +$0.0252

Dollar/Yen: 145.44 -0.13 yen

Dollar/Euro: $1.0940 +$0.0034

Dollar Index: 103.00 -0.18

Gold: $1932.00 -$12.00

Bitcoin: 29,366 -7

Crude Oil: $81.43 -$1.08

DJIA: 35,043 -265

NASDAQ: 13,667 -121

S&P 500: 4450 -39

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.