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Daily Market Analysis January 10, 2022

January 10th, 2022 10:08 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

Interest rates began higher again this morning, at 9:00 am ET the 10 yr. traded 1.80% +3 bps; MBS prices down 30 bps from Friday. Goldman Sachs comments sending rates higher with its new forecast that the Fed will likely increase rates four times this year. Over the last month the estimates for Fed increases have increased from two increases this year to now four. Rapid progress in the U.S. labor market and hawkish signals in minutes from the Dec. 14-15 Federal Open Market Committee suggest faster normalization, Goldman’s Jan Hatzius said in a research note. “We are therefore pulling forward our runoff forecast from December to July, with risks tilted to the even earlier side,” Hatzius said. “With inflation probably still far above target at that point, we no longer think that the start to runoff will substitute for a quarterly rate hike. We continue to see hikes in March, June, and September, and have now added a hike in December.” Goldman saying the Fed balance sheet run-off will begin in July from previous estimates in Dec. The comments from Goldman are driving rates higher this morning.

In its December meeting minutes, Fed officials signaled they are preparing to move faster than the last time they tightened monetary policy in a bid to keep the U.S. economy from overheating amid high inflation and near-full employment. These conditions -- along with a larger balance sheet that’s suppressing longer-term borrowing costs -- “could warrant a potentially faster pace of policy rate normalization,” the minutes said. Tomorrow Powell will testify at his confirmation hearing before the Senate banking committee, he will be grilled on his views on everything from when to start raising interest rates to whether to adopt bank capital standards tied to climate risks; but will be confirmed.

Expectations for the Federal Reserve to begin raising interest rates in March; as recently as just weeks ago it was only a few thinking that but the slide in the U.S. unemployment rate and fresh signs that central bankers are eager to wind back record policy stimulus to confront historically high inflation. “It’s hard to avoid the conclusion that the labor market is very tight. We believe Fed officials are coming to the same conclusion, and that it may be a tough sell to hold off on the first hike until June, our prior call,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., wrote in a note Friday. “We now see liftoff in March, followed by a quarterly pace of hikes thereafter.”

At 9:30 am the DJIA opened -115, NASDAQ -183, (three month low) S&P -34. 10 yr. 1.80% +3 bps. FNMA 3.0 30 yr. coupon -34 bps from Friday and -44 bps from Friday. (We are now tracking the 3.0 FNMA coupon with 30 yr. mortgage rates over 3.50%.)

This week begins earnings season, on Friday banks will lead off.

Its possible volatility will increase today, that said, there is little reason to attempt trading that idea.

PRICES @ 10:00 AM

10 yr. note: 1.80% +3 bp

5 yr. note: 1.55% -5 bp

2 yr. note: 0.87% +2 bp

30 yr. bond: 2.14% +2 bp

Libor Rates: 1 mo. 0.105%; 3 mo. 0.236%; 6 mo. 0.376%; 1 yr. 0.662% (1/7/22)

30 yr. FNMA 3.0: @9:30 102.47 -34 bp (-44 bp from 9:30 Friday)

30 yr. FNMA 2.5: @9:30 100.14 -42 bp (-64 bp from 9:30 Friday)

30 yr. GNMA 2.5: @9:30 100.80 -41 bp (-41 bp from 9:30 Friday)

Dollar/Yuan: $6.3757 -$0.0021

Dollar/Yen: 115.30 -0.23 yen

Dollar/Euro: $1.1291 -$0.0073

Dollar Index: 96.19 +0.47

Gold: $1794.30 -$3.10

Bitcoin: 40,872 -1,620

Crude Oil: $78.75 -$0.15

DJIA: 35,850 -381

NASDAQ: 14,611 -327

S&P 500: 4606 -72

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on January 10th, 2022 10:08 AM

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