CHM Blog

November personal consumption expenditures (PCE), the Fed’s inflation go to, inflation lower than forecasts. Month/month overall PCE +0.1% on forecasts of +0.2%, year/year expected at 2.5% reported at 2.4% although still higher than 2.3% in October. The core PCE month/month expected at +0.2% increased 0.1%, year/year thought to be +2.9% reported at +.2.8% and unchanged from October. Prices for goods increased less than 0.1% and prices for services were up 0.2%; the core was the least increase in six months. Food prices increased 0.2% and energy prices also edged up 0.2%.

November personal income expectations expected at +0.4%, increased 0.3% and down from +0.7% in October. Personal spending forecasts +0.5% reported at +0.4% and better than +0.3% in October.

The reaction to the two data points pushed the 10 year note yield down to 4.50%, -7 bp. The initial reaction in MBS prices +26 bps from yesterday’s -3 bps on FNMA 6.0 coupon.

At 9:30 am ET the DJIA opened -141, NASDAQ -187, S&P -30. 10 year note at 9:30 am 4.51% -6 bps back to the level on Wednesday after increasing 5 bps yesterday. FNMA 6.0 30 year coupon at 9:30 am +29 bps from yesterday’s close and +29 bp from 9:30 am yesterday.

The House failed to pass the continuing resolution to keep the government from a partial shutdown last night. The government due to shut down at mid-might tonight. The House will continue to work out a compromise through the day. Likely a deal will be reached, it is the same thing we put up with each year and in the final minutes it usually gets resolved. Even if it doesn’t the partial shutdown will not impact the banking system or have direct impact on consumers.

At 10 am the University of Michigan consumer sentiment index for December, the index forecasts at 74.0 the same as mid-month; reported at 74.0.

Interest rates technically overbought and likely will consolidate the recent increases. Today’s inflation data helping but the wider outlook after Powell and the FOMC making it clear the Fed isn’t ready to lower rates; inflation remains elevated, as long as it remains this way the Fed isn’t likely to lower rates even if markets continue to think two more cuts next year. Cutting rates isn’t the cure for inflation, it can elevate it rather than ease it.

PRICES @ 10:00 AM

10 year note: 4.52% -5 bp

5 year note: 4.36% -6 bp

2 year note: 4.29% -4 bp

30 year bond: 4.72% -2 bp

30 year FNMA 6.0: @9:30 am 100.63 +29 bp (+29 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 102.17 +17 bp (+23 bp from 9:30 am yesterday)

30 year GNMA 6.0: @9:30 am 100.73 +21 bp (+17 bp from 9:30 am yesterday)

Dollar/Yen: 156.56 -0.88 yen

Dollar/Euro: $1.0390 +$0.0028

Dollar Index: 108.07 -0.34

Gold: $2,632.30 +$24.20

Bitcoin: 95,466 -808

Crude Oil: $68.53 -$0.85

DJIA: 42,312 -30

NASDAQ: 19,273 -99

S&P 500: 5855 -12

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.

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