February 23rd, 2023 9:57 AM by Richard Sardella MLO.100007700/NMLS 233568
Overnight the 10 increased 2 bps to 3.95%. At 8:30 am ET weekly jobless claims were estimated at 200K, as released claims were 192K, down 3K from the previous week; the 4-week average 191.25K from 189.50K Also, at 8:30 am Q4 GDP preliminary, the advance report released last month was +2.9% and that was what was expected, as released +2.7%, personal consumption expenditures thought to be +2.0% dropped to +1.4%. The immediate reaction increased the 10 from 3.95% to 3.97%, MBS prices -14 bps from yesterday’s close. Stock indexes in futures trading generally unchanged.
Two Fed officials today; Atlanta Fed President Raphael Bostic will speak at 10:50 am, followed by his San Francisco counterpart Mary Daly at 2 pm. Neither will directly impact markets just more of the same.
Wage inflation continues, yesterday Wal-Mart said it will spend $1B to increase pay, today Honda saying it will raise wages by 5.0%, representing the biggest increase in 30 years. Just two of many now paying more to employees and that is another headwind for the Fed attempting to drop inflation to 2.0%. Not hearing much, but increasing wages adds to the thought that inflation may be embedding itself, that will stress what the Fed can do.
Minutes from the FOMC meeting released yesterday eased market concerns the FOMC might increase the FF rate by 50 bps at the March. A couple of members and/or Fed officials had sent up trial balloons that suggested a 50 bp increase would be the right call, however the minutes were taken as a relief that 25 bp increase, not 50. The minutes showed most thought a slower pace provided the best way to manage the risks of raising rates too much or too little. But the minutes also revealed some officials were concerned about stopping or slowing their inflation-fighting campaign too soon. “A number of participants observed that a policy stance that proved to be insufficiently restrictive could halt recent progress in moderating inflationary pressures.” Appears that there is some disagreement within the FOMC, but the market reaction is just 25 bps. Inflation is slowing, not new news, but the pace is slow, and inflation is well above 2.0% that the Fed wants.
Tomorrow is key this week; inflation release on Jan PCE (m/m 0.4% from +0.1%; year/year +4.9% from 5.0%). Jan consumer income (+1.0% from +0.2%; spending +1.2% from -0.2%). Final Feb U. of Michigan consumer sentiment index, expected at 66.4 the same as mid-month. Jan new home sales (617K, the same as Dec).
At 9:30 am after trading unchanged in futures per-open trading the stock indexes were flat, on the open the DJIA +122, NASDAQ +113, S&P +29. The 10 year note, up 3 bps at 8:30 am, at 9:30 am unchanged at 3.93%. MBS prices at 9 am -14 bps, at 9:30 am +13 bps from yesterday and +9 bps from 9:30 am yesterday.
At 1 pm Treasury will auction 7 year notes.
The 10 still hugging 3.90%, slightly higher but little follow-through after pushing above the support. Key data tomorrow; inflation, personal income and spending, new home sales, consumer sentiment index. After clearing 3.90% on Tuesday. Tomorrow there are key releases. At 10 am the 10 is back to 3.90% after the high at 3.97% early this morning.
PRICES @ 10:00 AM
10 yr note: 3.91% -2 bp
5 yr note: 4.13% unch
2 Yr note: 4.70% -1 bp
30 yr bond: 3.89% -3 bp
Libor Rates: 1 mo 4.604%; 3 mo 4.928%; 6 mo 5.271%; 1 yr 5.619% (2/22/23)
30 yr FNMA 6.0: @9:30 am 101.25 +11 bp (+8 bp from 9:30 am yesterday)
30 yr FNMA 5.5: @9:30 am 99.86 +13 bp (+9 bp from 9:30 am yesterday)
30 yr GNMA 5.5: @9:30 am 100.25 +16 bp (+20 bp from 9:30 am yesterday)
Dollar/Yuan: $6.8976 +$0.0054
Dollar/Yen: 134.87 -0.06 yen
Dollar/Euro: $1.0614 +$0.0007
Dollar Index: 104.59 unch
Gold: $1831.60 -$9.90
Bitcoin: 24,036 +232
Crude Oil: $75.36 +$1.41
DJIA: 33,247 +201
NASDAQ: 11,627 +119
S&P 500: 4026 +35
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.