CHM Blog

After waiting a week for inflation news markets got the first with November CPI this morning. Prior to the release at 8:30 am ET the 10 year yield traded at 4.18% down 6 bps from yesterday’s close. Immediately after the report the 10 shot back to 4.22% -2 bps from yesterday. The consumer price index estimate was for month/month CPI 0.0% unchanged from October, as reported increased 0.1%, year/year expected 3.1% down from 3.2% in October reported at 3.1%. The more important core, ex food and energy month/month at 0.3% was as forecast but increased from 0.2% in October, year/year expected at 4.0% reported at 4.0% and was unchanged from October’s report. The shelter index did increase 0.4% and may get the Fed’s attention when thinking about cutting rates.

Very early morning news prior to CPI touted the belief the Fed would cut rate rates at least four times next year, that story disappeared after the report hit. Inflation is cooling but what we saw this morning, while essentially in line with forecasts didn’t meet up to the numbers traders were expecting. By 9 am the 10 year note yield climbed back to unchanged frm yesterday, now waiting for tomorrow’s producer prices although PPI isn’t as important consumer prices. CPI wasn’t bad news, just not as weak as what was expected in overnight trading.

The FOMC meeting is getting underway this morning, tomorrow a big day with the policy statement. Expect the statement to continue the same theme, the Fed will continue to assess all incoming data and set policy based on it. Powell and the Fed won’t move too rapidly in lowering rates, and when that time comes markets will have already discounted the cuts. Back in the seventies the Fed backed off its tightening only to see inflation reheat, Powell won’t let that happen this time.

FOMC will release its quarterly projections tomorrow with the policy statement. On Thursday, the ECB meeting, and the Bank of England meeting. UK employment data released today showing weaker-than-expected wage growth and higher-than-expected unemployment claims. Consumer sentiment in Europe is increasing, Eurozone's December ZEW Economic Sentiment 23.0 (expected 11.2; last 13.8), Germany's ZEW Economic Sentiment increased for fifth consecutive month.

At 9:30 am the DJIA opened +38, NASDAQ +1, S&P -5. 10 year at 9:30 am back to unchanged at 4.24%.FNMA 6.5 30 year coupon at 9:30 am +5 bps frm yesterday’s close and +6 bps frm 9:30 am yesterday.

At 1 pm Treasury will round out this week’s borrowing with $21B of 30 year bond auction.

Technically yesterday the 10 year note breached its 20-day average for the first time since the end of October, didn’t hold though; this morning back below it. The 9-day relative strength index still under 50, a positive but any increase in the 10 year yield will turn it negative.

PRICES @ 10:00 AM

10 yr note: 4.24% unch

5 yr note: 4.25% unch

2 Yr note: 4.73% +2 bp

30 yr bond: 4.34% +1 bp

30 yr FNMA 6.5: @9:30 am 101.84 +5 bp (+6 bp frm 9:30 am yesterday)

30 yr FNMA 6.0: @9:30 am 100.68 +3 bp (unch frm 9:30 am yesterday)

30 yr GNMA 6.0: @9:30 am 101.11 +24 bp (+7 bp frm 9:30 am yesterday)

Dollar/Yuan: $7.1766 +$0.0007

Dollar/Yen: 145.67 -0.48 yen

Dollar/Euro: $1.0778 +$0.0012

Dollar Index: 104.07 -0.03

Gold: $1996.80 +$3.10

Bitcoin: 41,475 +382

Crude Oil: $69.23 -$2.09

DJIA: 36,408 +3

NASDAQ: 14,435 +3

S&P 500: 4618 -4

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.