August 19th, 2022 9:53 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday US financial markets were extremely quiet for a change, the interest rate market and MBSs generally unchanged, so too were the stock indexes. Not so this morning.
Inflation fears extended in Japan and Europe. The overnight selling took place on weakness in other sovereign debt, assisted by more hot inflation figures. Japan's Core CPI was up 2.4% yr./yr. in July, representing the fastest rate of increase since 2014, while Germany's PPI was up 37.2% yr./yr. in July, accelerating past its peak from May. Investor sentiment in Europe has faced additional pressure after Germany's economic ministry released its monthly report, observing a continuation of a gloomy outlook due to high energy prices and continued supply chain issues.
Stock indexes in futures trading at 8:30 am ET the DJIA -230. The 10 yr. note at 8:30 am 2.96% +8 bps, MBSs -42 bps from yesterday. Stocks, interest rates, and even bitcoin getting hit hard in early trading.
For all the forecasts and letters to investors from major firms that the Fed would only increase the FF rate by 50 bps traders are still leery that 75 bps is not out of the question. Yesterday, James Bullard, St. Louis Fed, the Fed’s most aggressive voice for 75 bps reiterated that view. Inflation as you know has moderated recently but Powell and other Fed officials have consistently made it clear that the Fed is intent in breaking the back of inflation and there is enough concern that it will take months for the impact of higher rates to accomplish it. Inflation has slowed in energy sectors but not in food costs, auto prices and services. 50 or 75, it’s a daily debate, today the increase in rates implies today is a 75 day.
Next Thursday is significant for markets when the global Jackson Hole economic symposium begins.
Inflation in the euro area is likely to exceed the European Central Bank’s goal by significantly more than previously expected. A poll by the ZEW Institute in Mannheim, Germany, signaled far less optimism on the price outlook than the ECB’s own in-house projections, which show the inflation rate dropping to just over its aim of 2% by 2024. The respondents, meanwhile, have continuously revised up their forecasts in recent months.
At 9:30 am the DJIA opened -168, NASDAQ -133, S&P -25. 10 yr. at 9:30 am 2.97% +9 bps. FNMA 4.5 coupon and FNMA5.0 coupon both -34 bps from yesterday. FNMA 4.5 -34 bps from 9:30 am yesterday; 5,0 coupon -38 bps from 9:30 am yesterday.
PRICES @ 10:00 AM
10 yr note: 2.97% + 9 bp
5 yr note: 3.09% +6 bp
2 Yr note: 3.24 %+2 bp
30 yr bond: 3.22 +9 bp
Libor Rates: 1 mo 2.368%; 3 mo 2.984%; 6 mo 508%; 1 yr 3.996% (8/18/22)
30 yr FNMA 5.0: 101.42 -34 bp (-38 bp from 9:03 am yesterday)
30 yr FNMA 4.5: 100.31 -34 bp (-34 bp from 9:30 am yesterday)
30 yr GNMA 4.0: 99.52 -41 bp (-46 bp from 9:03 am yesterday)
Dollar/Yuan: $6.8154 +$0.0293
Dollar/Yen: 136.80 +0.91 yen
Dollar/Euro: $1.0056 -$0.0031 (nearing parity with the dollar)
Dollar Index: 108.01 +0.52
Gold: $1766.30 -$4.90
Bitcoin: 21,438 -1980
Crude Oil: $90.73 +$0.23
DJIA: 33,747 -252
NASDAQ: 12,745 -220
S&P 500: 4238 -46
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.