December 13th, 2021 9:47 AM by Richard Sardella MLO.100007700/NMLS 233568
Tomorrow the FOMC meeting begins, Wednesday the results with the policy statement and Powell’s press conference. Today there are no data points. The 10 yr. note began at 1.47% -2 bps, MBS prices +2 bps, stock indexes in futures markets at 9 am ET generally unchanged.
What will the FOMC do and say? That is the complete focus now. The Fed has really missed on inflation over the last six months, calling it transitory, and now finds itself playing catch up. Powell already announced the tapering will be twice what the Fed said as recently as two months ago, ending it by March or April. Raising rates will flow quickly as the Fed will move to stop what now appears as a systemic inflationary spiral, the highest in 40 years; higher rates will slow economic growth, how much is the question.
Meantime Congress is trying to pass the Build Back America bill trying to convince America that it will be fully paid for, the bill touted at $1.75 trillion by CBO. The CBO though had to score it on what the bill actually says that most of the entitlements like childcare allowance will end in one year and other entitlements also have expirations. The actual cost of the bill, according to CBO when calculating the bill over 10 yrs. $4.6 trillion. Why then is the CBO saying the impact to the deficit is just $200B over 10 yrs.? Because CBO, a political outfit beholden to Congress, can’t be so blunt. It is constrained by budget conventions imposed by Congress.
At 9:30 am the DJIA opened -38, NASDAQ -17, S&P -5. 10 yr. at 9:30 am 1.46% -3 bp. FNMA 2.5 30 yr. coupon at 9:30 am +8 bps from Friday’s close and +6 bp from 9:30 am Friday.
Interest rates supported this morning by a soft opening in equity markets. Treasury investors are losing more money than they have in four decades, once inflation is taken into account. In the face of what we believe will be a rapid increase in the FF rate and inflation running high for much longer than presently thought, the move to treasuries can only signify safety given the equity markets’ over-valuation. Maybe investors expect Russia to invade Ukraine, or the virus will spread to levels that would cause a recession.
PRICES @ 10:00 AM
10 yr. note: 1.45% -4 bp
5 yr. note: 1.24% -1 bp
2 Yr. note: 0.66% unch
30 yr. bond: 1.83% -5 bp
Libor Rates: 1 mo. 0.18%; 3 mo. 0.198%; 6 mo. 0.188%; 1 yr. 0.509% (12/10/21)
30 yr. FNMA 3.0: @9:30 am 103.59 +2 bp (+1 bp from 9:30 am Friday)
30 yr. FNMA 2.5: @9:30 am 102.06 +8 bp (+4 bp from 9:30 am Friday)
30 yr. GNMA 2.5: @9:30 am 102.06 +5 bp (+1 bp from 9:30 am Friday)
Dollar/Yuan: $6.3659 -$0.0040
Dollar/Yen: 113.56 +0.18 yen
Dollar/Euro: $1.1283 -$0.0034
Dollar Index: 96.25 +0.15
Gold: $1786.10 +$2.30
Bitcoin: 47,885 -2.158
Crude Oil: $71.06 -$0.60
DJIA: 35,730 -240
NASDAQ: 15,585 -45
S&P 500: 4690 -22
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 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.