CHM Blog

Daily Market Analysis July 1, 2022

July 1st, 2022 9:32 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

At 8 am ET 2.93% -4 bps, MBS prices at 8 am +33 bps. Stock indexes lower in pre-open trading, the DJIA down 61 after being down as much as 150 very early this morning.

Recession forecasts escalating every day, investors running to treasuries, the umbrella of safety. Overnight at one point the 2 yr. note yield dropped to 2.81%, down 17 bps. The 10 easily broke the key psychological 3.00% to 2.97% yesterday. It is panic time with almost every analyst now forecasting a recession ahead. Trading today is magnified by thin liquidity with the long holiday ahead. The decline in rates on safety trades flies squarely in the face of the Fed’s plan to increase the FF rate at the July meeting, looks like investors don’t believe the FOMC will go 75 bps as was the consensus a week ago, believing the Fed will succumb to the recession that is now almost a 100% possibility given the comments and how markets are reacting. BUT Jerome Powell said Wednesday that the risk of harm to the economy from higher rates was less important than restoring price stability. The fed funds benchmark is now seen maxing out below 3.40% in the first quarter of 2023, based on swaps pricing, suggesting the Fed may hold off increasing the FF rate as much as was expected after the July meeting in four weeks.

Recession worries increased yesterday when personal spending increased 0.2% against expectations of +0.5% and April spending revised from +0.9% to +0.6%. Inflation has moderated since March. Market-implied inflation expectations have been falling steadily along with nominal yields over the past three weeks. Among them, the five-year forward estimate of the five-year expected inflation rate is back around 2.1%, where it stood in February before spiking to 2.6% in April. The Fed targets a 2% average inflation rate over time. According to an article in Bloomberg this morning the recent rally in treasuries, a broad index measuring the performance of treasuries has fallen over 9% in 2022. Since 1973, the bond market has only posted five annual declines, with the most recent being a drop of 2.3% last year.

A “recession shock” begins for markets following the worst first-half year for the S&P 500 in more than 50 years, Bank of America Corp.’s Chief Investment Strategist Michael Hartnett says. Stocks and bonds around the world combined have fallen by the most on record, according to Bloomberg data going back to 1990, with more than $8 trillion wiped off the S&P 500 Index alone in its worst first-half performance in over half a century. Other seemingly bullish strategists broadly expect stocks to recover in the second half at least partially, according to Bloomberg surveys. But the likes of Michael Wilson at Morgan Stanley have warned of more declines until the market finds a bottom. Goldman Sachs Group Inc. strategists said on Friday that the risk of a renewed selloff in equity markets is still high as investors are only pricing a mild recession.

At 9:30 am the DJIA opened -28 after being up 150 overnight, NASDAQ opened -10, S&P unchanged. 10 yr. at 9:30 am 2.89% -8 bps. FNMA 4.5 30 yr. coupon at 9:30 am +55 bps from yesterday’s close and 58 bps higher than 9:30 am yesterday.

At 10 am June ISM manufacturing index expected at 55.0 from 56.1 in May, as reported the index fell to 53. May construction spending -0.1% against forecasts of +0.5%.

PRICES @ 10:00 AM

10 yr note: 2.85% -12 bp

5 yr note: 2.82% -18 bp

2 Yr note: 2.79% -14 bp

30 yr bond: 3.09% -3 bp

Libor Rates: 1 mo 1.786%; 3 mo 2.285%; 6 mo 2.935%; 1 yr 3.619% (6/30/22)

30 yr FNMA 5.0: @9:30 102.45 +45 bps (+47 bp from 9:30 am yesterday)

30 yr FNMA 4.5: @9:30 100.91 +55 bp (+58 bp from 9:30 am yesterday)

30 yr GNMA 4.0: @9:30 100.02 +52 bp (+60 bp from 9:30 am yesterday)

Dollar/Yuan: $6.7090 +$0.0095

Dollar/Yen: 135.42 -0.27 yen

Dollar/Euro: $1.0408 -$0.0077

Dollar Index: 105.45 +0.76

Gold: $1794.60 -$12.70

Bitcoin: 19.554 +824

Crude Oil: $108.12 +$2.36

DJIA: 30,814 +38

NASDAQ: 11,055 +27

S&P 500: 3791 +6

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on July 1st, 2022 9:32 AM

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