January 12th, 2022 8:51 AM by Richard Sardella MLO.100007700/NMLS 233568
Dec consumer price index at 8:30 am ET generally in line with forecasts. CPI in Dec increased 0.5% on estimates of 0.4%, yr/yr +7.0% with estimates at +7.1%; excluding food and energy (the core) +0.6% with estimates at +0.5%, yr/yr +5.5% with expectations of 5.4%. The initial reaction dropped the 10 yr from 1.74% yesterday to 1.72% and MBS prices +8 bps from yesterday. The increase in the CPI was led by higher prices for shelter and used vehicles. Food costs also contributed. Energy prices, which were a key driver of inflation through most of 2021, fell last month. More evidence, as if markets needed it, that the first rate hike will happen at the March FOMC meeting.
Yesterday Jerome Powell in his confirmation testimony once again commented that the supply chain disruptions that have led to decades high inflation would ease soon. Wait a minute though, China’s omicron is impacting its manufacturing, manufacturing is slowing quickly with the rapid spread. China isn’t as bad as in the US and other western countries, but China is the world’s biggest trading nation and its ability to keep its factories humming through the pandemic has been crucial for global supply chains. Shutdowns in clothing factories and gas deliveries, disruptions at computer chip manufacturers, a second city-wide lockdown in Henan province yesterday are questioning the supply chain recovery. HSBC economists caution that if the highly infectious variant which is already swamping much of the global economy spreads across Asia, especially China, then disruption to manufacturing will be inevitable. “Temporary, one would hope, but hugely disruptive all the same” in the next few months, they wrote in a research note this week.
More news later today; at 1:00 pm Treasury will sell $36B of 10s (9yr, 10 months). At 2:00 pm the Fed Beige Book and Dec Treasury budget, expected to show a deficit for the month of $25B after -$191.3B in November.
European Union regulators saying repeat booster doses every four months could eventually weaken the immune system and tire out people. The European Medicines Agency saying boosters “can be done once, or maybe twice, but it’s not something that we can think should be repeated constantly,”… “We need to think about how we can transition from the current pandemic setting to a more endemic setting.”
Rate and stock markets both oversold in the near term, both though have negative longer term outlooks. The first resistance for the 10 yr is 1.70%, the next 1.67%.
PRICES @ 10:00 AM
10 yr note: 1.73% -1 bp
5 yr note: 1.50% unch
2 Yr note: 0.90% +1 bp
30 yr bond: 2.07% unch
Libor Rates: 1 mo 0.113% 3 mo 0244% 6 mo 0.386% 1 yr 0.696% (1/11/22)
30 yr FNMA 3.0: @9:30 102.70 +19 bp (+23 bps from 9:30 yesterday)
30 yr FNMA 3.5: @9:30 N/A
30 yr GNMA 3.0: @9:30 102.75 +17 bp (+35 bp frm 9:30 yesterday)
Dollar/Yuan: $6.3603 -$0.0138
Dollar/Yen: 115.15 -0.14 yen
Dollar/Euro: $1.1417 +$0.0046
Dollar Index: 95.24 -0.38
Gold: $1823.00 +$4.50
Bitcoin: 43,774 +951
Crude Oil: $82.28 +$1.06
DJIA: 36,430 +178
NASDAQ: 15,287 +134
S&P 500: 4743 +30
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.