CHM Blog

Two key economic releases at 8:30 am ET this morning. Weekly jobless claims were expected to be unchanged from the week before at 207K, as reported claims increased to 230K +23K. the previous two week’s claims were at the lows prior to the pandemic, the increase today isn’t cause for concern. Claims remain low from the highs when the pandemic began in March 2020.

Dec producer price index at 8:30 am, like yesterday’s CPI the monthly index was weaker than in November, expected at +0.4% from +0.8%, as reported +0.2%. Yr/yr though PPI at 9.7% was one click higher than November’s 9.6%. The core PPI was expected +0.5% and reported the same, yr/yr expected +8.3% with forecasts of 8.0% and increased from 7.7% in November. Monthly inflation edging a little lower but yr/yr is increasing. If monthly data continues to weaken compared to the prior month the yr/yr increases should also weaken in the months ahead. Not a prediction but simple math. When trade services are included with the core (food and energy) the yr/yr is 6.9% and unchanged from November.

With the Fed worrying more about inflation and that will last much longer than the Fed originally expected, the fear has become CEOs major concern. The Conference Board conducted a survey of 900 global CEOs and found more than half of the CEOs expect price pressures to persist until at least mid-2023 after having registered as a low-level worry in the year-ago survey. Honeywell’s CEO commenting, “We have to be very, very careful how it gets solved, too, because it’s a little bit like driving your vehicle. If you slam on the brakes too hard, we could see the other side of inflation, which is a recession.” His comments echo what many business leaders are saying. The current talk is the Fed will increase rates 1.0% in four moves this year (0.25% each time). Omicron is keeping workers away from jobs, but omicron is almost over, finally increasing numbers of scientists are coming to that belief. European CEOs ranked inflation as the top worry and Covid-19 disruption as 10th, below the expected impact of regulators.

At 9:30 am the DJIA opened +121, NASDAQ +37, S&P +10. 10 yr at 9:30 am 1.73% -1 bp. FNMA 3.0 30 yr coupon at 9:30 am +3 bps from yesterday and -12 bps from 9:30 am yesterday. (yesterday after 4:00 pm MBS prices fell 9 bps from 4:00 pm levels).

At 1:00 pm Treasury will sell $22B of 30s (29 yrs, 10 months). Yesterday’s 10 yr auction met with average demand compared to the last 12 10 yr auctions.

Short term technicals have resistance at 1.70% for the 10 yr note, yesterday it slipped to 1.71% then closed at 1.74%. After the huge spike that sent the 10 yr from 1.50% to 1.80% last Friday the oversold condition is now consolidating and needing more negativity to resume the increase. The Fed expected to increase the FF rate at the March meeting and many believing there will be four increases, the incoming data over the next month will either confirm the Fed’s present forecast or the inflation fears will lessen. In the meantime, the trend and outlook remain quite bearish.

PRICES @ 10:00 AM

10 yr note: 1.74% unch

5 yr note: 1.50% -1 bp

2 Yr note: 0.91% unch

30 yr bond: 2.09% unch

Libor Rates: 1 mo 0.111%; 3 mo 0.238%; 6 mo 0.384%; 1 yr 0.699% (1/12/22)

30 yr FNMA 3.0: @9:30 102.58 +3 bp (-12 bps from 9:30 yesterday)

30 yr FNMA 3.5: @9:30 104.73 +5 bp (+14 bps from 9:30 yesterday)

30 yr GNMA 3.0: @9:30 102.69 +2 bp -5 bp frm 9:30 yesterday)

Dollar/Yuan: $6.3589 +$0.0005

Dollar/Yen: 114.26 -0.38 yen

Dollar/Euro: $1.1479 +$0.0036

Dollar Index: 94.68 -0.23

Gold: $1820.00 -$7.00

Bitcoin: 44,109 +305

Crude Oil: $82.66 +$0.03

DJIA: 36,429 +139

NASDAQ: 15,216 +28

S&P 500: 4735 +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.