August 2nd, 2022 9:15 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday it was all about treasuries, the 10 yr. note fell 7 bps to 2.57%; this morning it continues, the 10 at 8:30 am ET 2.54% -3 bps. MBS prices +13 bps yesterday, this morning at 8:30 am -2 bps. Stock indexes in futures trading prior to the 9:30 am opened down 187 on the DJIA.
The outlook for inflation has improved recently, the consensus now, inflation has peaked. The Fed isn’t sure, but Wall Street is. The idea that after another FF rate increase in Sept the Fed will end its increases and in 2023 the fed will begin lowering rates. The 10 yr. in mid-June rose to 3.50%, down almost 100 bps since then. The FOMC meeting and Powell’s press conference last week didn’t sound like the Fed is on board with that outlook. The Fed has about 400 economists, Wall Street has thousands of economists and analysts. One driver for the view inflation has ebbed is the price of oil (and gas) another is China’s economy is stalled. The real-estate crisis has ballooned this year, engulfing developers to banks, and forcing Beijing to soften its growth ambitions; the growth model that’s sustained China’s economy for decades shows signs of strain.
In Europe, the Russian invasion is seen as reducing inflation with substantial fiscal stimulus programs according to comments from the ECB. According to economists “The total stimulus measures in response to the war are estimated to have an impact of almost 0.4 percentage points on overall growth and a limited impact of just over 0.1 percentage point on inflation.” Money markets show the ECB will raise rates by an additional 100 basis points. That’s roughly half of what was expected in late July; at one point today, traders were betting on less than 100 basis points. The looming recession has led investors to sell the euro and buy government bonds. German two-year notes are yielding 0.21%, the lowest since May. The euro weakened 0.2% to $1.0238.
At 9:30 am the DJIA opened -146, NASDAQ -75, S&P -17. 10 yr. at 9:30 am 2.59% +2 bps. FNMA 4.5 30 yr. coupon at 9:30 am -19 bps and unchanged from 9:30 am yesterday.
JOLTS June job openings, expected at 11.0 mil from 11.254 mil in May; as released 10.7 mil.
Over the last two weeks the 10 yr. note yield has dropped from 3.08% to 2.59% (50 bps). In the short term the bond and mortgage markets are as technically more overbought that I have seen in years. It cannot continue without some consolidation and possibly some increases. Speaking in the short term, a few days, or weeks; not speculating about the wider perspective but this recent decline has been excessive, particularly over the last week. Already this morning the 10 yr. is up 5 bps and MBS prices are 34 lower at 10 am (at 9:30 am -19 bp).
PRICES @ 10:00 AM
10 yr note: 2.63% +6 bp
5 yr note: 2.73% +9 bp
2 Yr note: 2.97% +10 bp
30 yr bond: 2.93% +1 bp
Libor Rates: 1 mo 2.366%;3 mo 2.802%; 6 mo 3.376%; 1 yr 3.742% (8/1/22)
30 yr FNMA 5.0: @9:30 102.56 -12 bp (-3 bp from 9:30 am yesterday) (-20 bp at 10:00 am)
30 yr FNMA 4.5: @9:30 101.70 -19 bp (unch from 9:30 am yesterday) (-34 bp at 10:00 am)
30 yr GNMA 4.0: @9:30 101.03 -27 bp (+8 p from 9:30 am yesterday) (-37 bp at 10:00 am)
Dollar/Yuan: $6.7556 -$0.0132
Dollar/Yen: 131.40 -0.20 yen
Dollar/Euro: $1.0212 -$0.0051
Dollar Index: 105.81 +0.36
Gold: $1792.40 +$4.70
Bitcoin: 22,817 -211
Crude Oil: $94.33 +$0.44
DJIA: 32,487 -313
NASDAQ: 12,306 -63
S&P 500: 4091 -25
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.