CHM Blog

Overnight the 10 year note dipped to 4.22% -3 bps, but by the US session began the note was unchanged at 4.25%. Last week there very few data points to consider, this week there are several key reports led by Thursday’s PCE inflation data. Beginning this morning Treasury will auction 2s and 5s (11:30 am and 1 pm). Recent Treasury auctions haven’t met with strong demand, soft demand and bidding won’t sit well; last week Treasury sold 20 year bonds that met with the weakest demand we have seen in a long time, the result sent rates higher and MBS prices lower. Stock indexes in pre-open trading were generally quiet.

The last two weeks the bellwether 10 year notes has traded in a very narrow range, 4.33% to 4.20%, the tight range may be broken when markets see the PCE inflation report on Thursday, month over month both the overall and core are thought to be +0.4% while year/year both expected to decline from December reads. On top of the heavy calendar, the do-nothing Congress once again must kick the can by Friday to avert a partial shutdown as Treasury runs out of money, again.

At 9:30 am the DJIA opened +20, NASDAQ +34, S&P +6. 10 year at 9:30 am 4.25% unchanged. FNMA 6.0 30 year coupon at 9:30 am +3 bps from Friday’s close and +21 bps from 9:30 am Friday.

At 10 am January new home sales weaker than expected, at 661K against estimates of 685K, December sales revised to 651K from 664K. We will have details this afternoon.

Until Thursday it is reasonable to expect rates to continue in the narrow ranges, once PCE is released the likelihood that the 10 year note will breakout of its recent range.

There are a few Fed officials speaking later this week but don’t look for anything new. The Fed and its officials have made it abundantly clear there is no rush to lower rates; the nearest target markets now think is at the May FOMC meeting at the earliest. Inflation has come in hotter than thought, the Fed doesn’t want to cut too soon only to have to increase rates if inflation isn’t tamed. Markets have been debating when the Fed would cut, now it has sunk in with little debate about an earlier cut. On top of that the present level of the yield curve has mostly discounted two rate cuts at the present levels.

PRICES @ 10:00 AM

10 year note: 4.26% +1 bp

5 year note: 4.29% +1 bp

2 year note: 4.69% +2 bp

30 year bond: 4.37% unch

30 year FNMA 6.0: @9:30 am 100.39 +3 bp (+21 bp from 9:30 am Friday)

30 year FNMA 6.5: @9:30 am 101.69 +7 bp (+14 bp from 9:30 am Friday)

30 year GNMA 5.5: @9:30 am 99.34 +2 bp (+23 bp from 9:30 am Friday)

Dollar/Yuan: $7.1975 +$0.0021

Dollar/Yen: 150.70 +0.19 yen

Dollar/Euro: $1.0849 +$0.0026

Dollar Index: 103.78 -0.15

Gold: $2,036.20 -$13.20

Bitcoin: 51,669 -69

Crude Oil: $76.49 unch

DJIA: 39,220 +85

NASDAQ: 16,009 +13

S&P 500: 5092 +3

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.