January 25th, 2023 9:04 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday the 10 yr yield fell 5 bps, this morning at 8:30 am ET 3.43% -3 bps. MBS prices in very early activity up 5 bps. Four days of increasing yield on the 10 from 3.40% to 3.53% now drifting back to the very solid technical support at 3.40%. Stock indexes continue their choppy trading, yesterday the DJIA +104, in futures trading this morning -270.
Weekly MBA mortgage applications increased last week, the composite index +7.0% after increasing 27.9% the week before. Purchase application +3.4% from +24.7% the prior week. Refinance application +14.6% from +34.2%.
Recession, or not? Some say yes, others are beginning to price in a Fed rate cut later this year. Manufacturing, housing, and techs are already in recession. Next week the FOMC will increase the FF rate by 25 bps, that is a certainty, the longer outlook is a tossup and depends on the strength (or weakness) of the economy. At the long end of the curve the 10 yr have already seen their highs when the 10 yr climbed to 4.20% at the end of October and 30 yr mortgage rates were at 7.22%. Inflation is slowing, the forecasts for Friday’s Dec PCE are expected to decline more.
Mixed signals from the labor market, still strong but signs of weakening are surfacing. Non-farm payrolls are lessening recently, still good but not meeting expectations; average work week hours have fallen the last two months, analysts point out that hasn’t occurred since 2006. The short answer, jobs still improving but slowing, excess employees are being jetted from tech companies, but increasing in services. The Fed has been clear that it wants to see higher unemployment and lessening wages to stop inflation creep. Tomorrow weekly jobless claims expected at 202K from 190K the week before; claims have been close to their pre-pandemic lows that hugged the 200K area.
At 9:30 am the DJIA opened -244, NASDAQ -184, S&P -43. 10 yr at 9:30 am 3.44% -2 bps 3.47% at 7 am. Fannie 5.5 30 yr coupon at 9:30 am +2 bps from yesterday’s close and +17 bps from 9:30 am yesterday.
This afternoon at 1 pm Treasury will sell $43B of 5 yr notes; expect another strong one. The last three weeks treasury offerings have met with strong bidding from foreign bidders, driven by the weakening dollar recently.
Key data tomorrow and particularly Friday with Dec inflation in the PCE should hold the 10 yr in its recent tight range with technical support at 3.40%. If PCE on Friday is weaker than the low estimates the long end will break 3.40% and push the 10 down to 3.25%.
PRICES @ 10:00 AM
10 yr note: 3.44% -2 bp
5 yr note: 3.56% -2 bp
2 Yr note: 4.14% -2 bp
30 yr bond: 3.60% -1 bp
Libor Rates: 1 mo 4.516%; 3 mo 4.822%; 6 mo 5.109%; 1 yr 5.344% (1/24/23)
30 yr FNMA 6.0: @9:30 am 102.27 unch (+14 bp from 9:30 am yesterday)
30 yr FNMA 5.5: @9:30 am 101.36 +2 bp (+17 bp from 9:30 am yesterday)
30 yr GNMA 5.5: @9:30 am 101.19 +6 bp (+24 bp from 9:30 am yesterday)
Dollar/Yuan: $6.7840 -$0.0005 (China closed)
Dollar/Yen: 129.74 -0.43 yen
Dollar/Euro: $1.0894 +$0.0006
Dollar Index: 101.90 -0.02
Gold: $1931.40 -$4.00
Bitcoin: 22, 524 -375
Crude Oil: $80.14 unch
DJIA: 33,437 -297
NASDAQ: 11,089 -245
S&P 500: 3958 -60
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.