January 12th, 2023 10:02 AM by Richard Sardella MLO.100007700/NMLS 233568
Dec CPI m/m -0.1% as expected, yr./yr. 6.5% from 7.1% in Nov; excluding food and energy m/m 0.3% as expected, yr./yr. 5.7% from 6.0% also as expected. The initial reaction sent the 10 yr. down to 3.47% -15 bps, MBS prices +24 bp. The core at 5.7% the slowest pace since Dec 2021. Inflation continues to slow and provides more reason for those that believe the Fed is close to ending rate increases. That is unlikely given the consistent remarks from Powell and most all other Fed officials. The consumer is still strong, and the service sector and labor market will remain a high hurdle for the Fed. It isn’t clear whether Philly Fed pres. Harker knew the CPI data before he said the central bank should lift interest rates in quarter-point increments “going forward” as it approaches the end point in its hiking campaign.
Housing costs in Dec +0.8% an increase from Nov. Rents and owners’ equivalent rent both rose by the same amount, while hotel stays advanced 1.5% after falling in the prior month. Don’t make much from it though, the calculations for shelter costs is a lagging report. Stripping out energy, rent and owners’ equivalent rent, services prices were up 0.3%, according to Bloomberg calculations. Inflation continues to slowdown but way too high for the Fed to tolerate; 25 bp increase on Feb 1st when the FOMC meets again.
Weekly jobless claims are 205K, estimates were 215K, the 4 week average 212.50K from 214.25K.
At 9:30 am the DJIA opened +90, NASDAQ +34, S&P +12. 10 yr. 3.50% -4 bp. FNMA 5.5 30 yr. coupon at 9:30 am +20 bps and +33 bps from 9:30 am yesterday. ***By 10 am MBS prices slipped to +10 bps***
At 1 pm Treasury will auction $18B of 30s, re-opening the issue last November.
CPI as expected, no huge reaction to the report. After a brief decline to 3.47% -8 bp the 10 yr. note at 10 am up 1 bp to 3.55%. The stock indexes at 9:30 am opened slightly better, by 10 am the indexes rolled over and were declining. Inflation didn’t surprise either way so no lasting reaction to it. It has just been 30 minutes since the stock market opened, already the indexes have seen volatility.
PRICES @ 10:00 AM
10 yr note: 3.55% +1 bp
5 yr note: 3.63% -4 bp
2 Yr note: 4.19% -2 bp
30 yr bond: 3.70% +3 bp
Libor Rates: 1 mo 4.423%; 3 mo 4.815%; 6 mo 5.128%; 1 yr 5.418% (1/11/23)
30 yr FNMA 6.0: @9:30 am 102.46 +31 bp (+40 bp from 9:30 am yesterday)
30 yr FNMA 5.5: @9:30 am 101.60 +20 bp (+33 bp from 9:30 am yesterday)
30 yr GNMA 2.5: @9:30 am 101.34 +11 bp (+17 bp from 9:30 am yesterday)
Dollar/Yuan: $6.7353 -$0.0352
Dollar/Yen: 130.54 -1.95 yen
Dollar/Euro: $1.0788 +$0.0031
Dollar Index: 102.65 -0.54
Gold: $1893.30 +$14.40
Bitcoin: 18,004 +448
Crude Oil: $78.77 +$1.36
DJIA: 33,952 -21
NASDAQ: 10,863 -69
S&P 500: 3959 -10
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.