CHM Blog

Prior to the release of the key inflation data at 8:30 am ET rates were higher, the 10 4.32% +5 bps, 2 year 4.70% +5 bp, FNMA 6.0 30 year coupon -19 bps. The key stock indexes were lower, S&P down 18 at 8:25 am.

At 8:30 am weekly jobless claims, expected 210K increased 215K +14K from the previous week.

Markets have been anticipating the PCE inflation data for two weeks after January CPI inflation increased more than thought, that reaction sent rates higher. Since then, rates have settled into narrow ranges. January PCE generally in line with estimates with little reaction. PCE month/month expected +0.3%, reported +0.3%, December +0.2%; year/year expected +2.4% hit at 2.4%, December year/year 2.6%. Core month/month expected +0.4% as forecast, year/year also as forecast at 2.8% and down from 2.9% in December. PCE, the Fed’s preferred inflation washed away the strong CPI data two weeks ago.

Also at 8:30 am, January personal income and spending. Income increased 1.0% on estimates of +0.4%, December income was up +0.3%. Spending thought to be +0.2% was right on the estimates.

The initial reaction to the key data was rather mute, the 10 increased to 4.34% +7 bps then quickly reversed, at 8:45 the 10 back to unchanged from yesterday, MBS price -6 bps. Prior to the data the stock indexes were under pressure, after the data the higher personal income and no surprises on inflation the indexes turned higher. Stock futures rose and bonds trimmed losses after inflation figures that matched expectations reinforced speculation the Federal Reserve will be able to cut rates as early as the second quarter. Markets are ignoring that the core PCE up 0.4% is the largest increase in a year. The PCE coming in as expected is a relief, allowing rates and the stock market to improve, pushed by the outlook for Fed cuts may come sooner than what had been building, higher for longer.

At 9:30 am the DJIA opened +41, NASDAQ +124, S&P +22. 10 year at 9:30 am 4.26% -1 bp. FNMA 6.0 30 year coupon at 9:30 am +5 bps from yesterday’s close and +17 bps from 9:30 yesterday)

At 9:45 am February Chicago purchasing managers index, expected at 47.3, the index at 44.0 and down from 46.0 remains in contraction.

At 10 am January pending home sales, thought to be up 0.8% dropped 4.9% after increasing 5.7% in December (revised from 8.3%).

Rates holding steady so far this morning. A relief that inflation met forecasts. The data this morning indicates the core month/month increased 0.4% and was higher than 0.1% in December (revised from +0.2%), but still the highest in a year. Some remarks this morning, that the data suggests the Fed could lower rates sooner than expected, we don’t see that, today’s data doesn’t show inflation has declined but didn’t increase. The Fed rate cut time frame hasn’t changed, the first cuts still expected in July.

PRICES @ 10:00 AM

10 year note: 4.23% -3 bp

5 year note: 4.23% -3 bp

2 year note: 4.63% -1 bp

30 year bond: 4.36% -5 bp

30 year FNMA 6.0: @9:30 am 100.41 +5 bp (+17 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 101.73 +3 bp (+12 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 99.35 +1 bp (+32 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1888 -$0.0088

Dollar/Yen: 149.60 -1.08 yen

Dollar/Euro: $1.0851 +$0.0011

Dollar Index: 103.78 -0.19

Gold: $2,058.20 +$15.50

Bitcoin: 62,994 +2,682

Crude Oil: $78.44 -$0.10

DJIA: 39,001 +52

NASDAQ: 16,088 +140

S&P 500: 5092 +24

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.