August 31st, 2022 9:13 AM by Richard Sardella MLO.100007700/NMLS 233568
At 8:15 am ET this morning ADP was back after two months away, re-engineering its formulas to better account for private jobs; August private jobs expected +228K, as reported +132K. The reaction a little volatile, the 10 jumped briefly to 3.16% +6 bps then quickly fell back to 3.12% +2 bp. MBS price reaction quiet then fell 12 bps by 8:45 am.
The debate continues about what the FOMC will do when it convenes on Sept 21st, 75 or 50. Fed officials continue to speak with forked tongues, some want 75, others want 50. Powell talked tough last week but summed it up with ‘data dependent’ as the crux of the decision. Friday the August employment report if the estimates prove to be correct could support a 50 bp increase as job growth is expected to slow from July (NFP jobs expected +293K from 528K in July). The JOLTS job openings yesterday showed openings increased to 11.239 mil from 11.040 mil with estimates at 10.4 mil. The Fed will have August CPI and PPI on the 13th and 14th. The idea that the Fed will increase by just 50 bps hasn’t been showing up in the trading on the yield curve, for now just a fuzzy good wish.
Loretta Mester, Cleveland Fed out saying it would be a mistake to anticipate inflation is headed lower and the Fed must keep up the tightening. Her view is benchmark rates at 4.0% (2.5 to 2.50% now). She anticipates the rate increases to slow economic growth, which she sees as running “well below 2%.” “My current view is that it will be necessary to move the fed funds rate up to somewhat above 4 percent by early next year and hold it there,”…. “I do not anticipate the Fed cutting the fed funds rate target next year.” … “It would be a mistake to declare victory over the inflation beast too soon. Doing so would put us back in the stop-and-go monetary policy world of the 1970s, which was very costly to households and businesses” We will stick with our outlook, the Fed will increase the FF rate by 75 bps at the next FOMC meeting. Her reference to the 1970s isn’t likely to resonate for most all our reader and most that work in the financial markets; if you didn’t live it, it doesn’t penetrate.
MBA mortgage applications last week; -3.7%, purchases -1.8%, re-finances -7.8% from the week before.
At 9:30 am the DJIA opened quietly +18, NASDAQ +92, S&P +14.. 10 yr. 3.11% +1 bp. FNMA 4.5 and 5.0 coupons at 9:30 am both- 5 bps; 4.5 -13 bps from 9:30 am yesterday, 5.0 -11 bp from 9:30 am yesterday.
At 9:45 am August Chicago purchasing managers index, expected unchanged from July at 52.1, as reported 52.2; it’s the lowest reading in about 2 yrs. but still holding above the 50 pivot.
PRICES @ 10:00 AM
10 yr note: 3.11% unch
5 yr note: 3.26% -1 bp
2 Yr note: 3.44% +1 bp
30 yr bond: 3.21% -3 bp
Libor Rates: 1 mo 2.564%; 3 mo 3.082%; 3.595%; 1 yr 4.160% (8/30/22)
30 yr FNMA 5.0: @9:30 am 101.09 -5 bp (-11 bp from 9:30 am yesterday)
30 yr FNMA 4.5: @9:30 am 99.64 -5 bp (-13 bp from 9:30 am yesterday)
30 yr GNMA 4.5: @9:30 am 100.22 -5 bp (-9 bp from 9:30 am yesterday)
Dollar/Yuan: $6.8948 -$0.0171
Dollar/Yen: 138.77 -0.02 yen
Dollar/Euro: $1.0005 -$0.0010
Dollar Index: 109.00 +0.23
Gold: $17223.40 -$12.90
Bitcoin: 20,325 +350
Crude Oil: $89.53 -$2.14
DJIA: 31,802 +11
NASDAQ: 11,963 +80
S&P 500: 3996 +10
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.