CHM Blog

More talk from central banker that rate cuts may not happen this year. European Central Bank policymakers have pushed back against rate cut excitement at the ongoing World Economic Forum in Davos with policymaker with ECBs Holzmann saying that the market should not count on rate cuts taking place in 2024. There are several ECB officials tomorrow. Tomorrow Eurozone CPI, UK CPI The World Economic Forum in Davos Switzerland is underway; world financial leaders at the annual conference where socializing and news quips mark the meeting. Stock indexes were trading lower in pre-open action. The 10 year note yield at 8:30 am ET 4.00% +6 bps.

The push back from central bankers that rate cuts are not a given pushing yields higher this morning. Markets had been increasing the belief of multiple cuts this year, some talking six or seven cuts; got out of hand and comments from Davos tempered those wild forecasts. European Central Bank’s Francois Villeroy de Galhau said that it’s too early to declare victory on inflation. Traders are awaiting Federal Reserve Governor Christopher Waller’s speech later today (11 am) for cues on the timing of a Fed rate cut, with money markets seeing a two-in-three chance of a reduction in March.

Friday coming quickly to pass a spending agreement or a partial shutdown. There will be something done, the constant deadlines for more borrowing have a clear history of last-minute deals. Not likely though, that a long-term spending plan will get passed. Breaking: spending bill just passed, $78B bipartisan deal, once again kicking the can down the road.

The January Empire State manufacturing index crashed, expected -4.7 from -14.5 in December fell to -43.7, the weakest since 2020 COVID. Orders declined and shipments slowed adding to the view US manufacturing is continuing to decline.

At 9:30 am the DJIA opened -86, NASDAQ -46, S&P -14. 10 year note at 9:30 am 3.99% +5 bps. FNMA 6.0 30 year coupon at 9:30 am -12 bps from Friday’s close and -16 bp from 9:30 am Friday.

Over the last two weeks the 10 year note yield has traded in a six bp range, the 20-day, 40 day and the 200-day averages are converging on 4.05%.

Schedule of this week’s Fed officials speaking: Tuesday 11 am Christopher Waller. Wednesday 9 am Michael Barr, 9 am Michelle Bowman, 3 pm John Williams. Thursday 7:30 Rapheal Bostic. Friday 1 pm Michael Barr, 4:15 pm Mary Daly.

PRICES @ 10:00 AM

10 year note: 4.01% +7 bp

5 year note: 3.90% +6 bp

2 year note: 4.21% +7 bp

30 year bond: 4.26% +8 bp

30 year FNMA 6.0: @9:30 am 101.45 -12 bp (-17 bp from 9:30 am Friday)

30 year FNMA 6.5: @9:30 am 102.41 -9 bp (-19 bp from 9:30 am Friday)

30 year GNMA 5.5: @9:30 am 100.75 -9 bp (+1 bp from 9:30 am Friday)

Dollar/Yuan: $7.1710 unch, closed

Dollar/Yen: 146.69 +0.95 yen

Dollar/Euro: $1.0871 -$0.0082

Dollar Index: 103.23 +0.82

Gold: $2.042.60 -$9.00

Bitcoin: 42,445 -231 (46,000 high)

Crude Oil: $72.68 unch

DJIA: 37,362 -230

NASDAQ: 14,897 -75

S&P 500: 4758 -26

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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