February 8th, 2023 9:37 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday chairman Powell stuck to his strong message. “We think we are going to need to do further rate increases,” Powell told David Rubenstein during a question-and-answer session at the Economic Club of Washington. “The labor market is extraordinarily strong.” If the job situation remains very hot, “it may well be the case that we have to do more,” he said. There was not much reaction to his comments, the 10 increased 4 bps, MBS prices increased 4 bps. Minneapolis Fed’s Kashkari and Atlanta Fed’s Bostic added their view that rates are likely to increase more than what markets were expecting last week prior to the employment report.
Inflation is slowing but jobs are continuing to increase, at the long end of the curve pressure isn’t as great as at the short end; long term rates suffer with inflation. The 2 year note at 4.45% is 80 bps higher than the 10, the 3 month T-Bill 100 bps higher. The spread between the short and long end of the curve is likely to widen even more as new inflation data continues to add to the view inflation is continuing to ease.
This morning the 10 opened down 2 bps to 3.66%, MBS prices in early activity +5 bps.
The Market Composite Index, a measure of mortgage loan application volume, increased 7.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 8 percent compared with the previous week. The Refinance Index increased 18 percent from the previous week and was 75 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 37 percent lower than the same week one year ago.
According to the schedule five Fed officials are speaking today. NY Fed’s Williams, Fed governor Waller, San Francisco’s Cook, Atlanta Fed’s Bostic, and Minneapolis Fed’s Kashkari. None of them will go against the Fed chair, continue to support Powell’s drive to kill inflation.
At 9:30 am the DJIA opened -119, NASDAQ -44, S&P -19. 10 year at 9:30 am 3.67% -1 bp. FNMA 5.5 30 year coupon +6 bps and +12 bps from 9:30 am yesterday.
At 1 pm Treasury will auction $35B of new 10 year notes. Yesterday’s 3 year auction was weak compared to all auctions over the last month, today’s 10 will also see less demand and less foreign demand.
PRICES @ 10:00 AM
10 yr note: 3.68% unch
5 yr note: 3.84% unch
2 Yr note: 4.47% unch
30 yr bond: 3.74% +2 bp
Libor Rates: 1 mo 4.581%; 3 mo 4.845%; 6 mo 5.135%; 1 yr 5.440% (2/7/23)
30 yr FNMA 6.0: @9:30 am 102.23 -2 bp +4 bps from 9:30 am yesterday)
30 yr FNMA 5.5: @9:30 am 100.95 +6 bp (+12 bp from 9:30 am yesterday)
30 yr GNMA 5.5: @9:30 am 101.09 unch (-5 bp from 9:30 am yesterday)
Dollar/Yuan: $6.7885 -$0.0042
Dollar/Yen: 131.30 +0.21 yen
Dollar/Euro: $1.0733 +$0.0003
Dollar Index: 103.37 -0.05
Gold: $1890.50 +$5.70
Bitcoin: 23,128 -73
Crude Oil: $78.45 +$1.31
DJIA: 34,121 -36
NASDAQ: 12,035 -78
S&P 500: 4149 -14
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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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.