July 18th, 2022 12:14 PM by Richard Sardella MLO.100007700/NMLS 233568
The choppiness continues; Friday the 10 yr. note yield was down 4 bps, at 8:30 am ET this morning up 6 bps; MBSs on Friday +38 bps, at 8:30 am this morning down 30 bps. Last week the 10 yr. traded in a 15 bps range, 3.05% to 2.90%. Waiting for the Fed, a week from Wednesday. 75 bps or 100 bps, the debate rages. One day a Fed official pumps up 100 bps, the next day another Fed official tilts to 75 bps. This morning in futures trading the indexes were better after the strong rally on Friday on renewed hopes that inflation -- and Fed rate hikes -- may be close to peaking. Inflation is slowing its assent but at 9.1% it is still increasing.
The push for 100 bps is that the Fed has to catch up to cut off inflation regardless of what it may do to the economy; the 75 bps based on the idea inflation has moderated already and the Fed doesn’t want to be blamed for driving the economy into prolonged slowdown. One week ago, markets were generally believing the Fed would increase the FF rate by 100 bps, today after the U. of Michigan consumer sentiment data on Friday and better June retail sales emotions swinging to 75 bps and possibly the Fed will end its push higher at the September FOMC meeting (Sept 21st). Inflation pressures remain high, and a recession seems increasingly likely, according to strategists at Morgan Stanley and Goldman Sachs Group Inc. The two firms also question the recent equity market rally, warning short-lived as inflation pressures remain high and a recession seems increasingly likely. One doesn’t have to look hard to find that the markets really don’t know what to expect or believe now. One clear point though, the Fed never wants to shock markets, so if 75 bps becomes the clear consensus that is what the Fed will do.
This week’s calendar is light on inflation data and overall economic measurements; this week’s reports are all about the housing markets.
At 10 am the July NAHB was expected at 66 from 67 in June, the index dropped to 55, the biggest monthly decline in 37 years.
Most of the big named strategists are urging caution as US and European stock markets rally amid bets that the Fed won’t deliver an outsized rate hike at its meeting next week.
The rampaging dollar is a little weaker this morning as the dollar/euro briefly fell below parity ($0.0095). The world can’t get enough dollars, one key support for the treasury, and other US markets. The one caveat, as the dollar gains gold prices have worsened. The dollar Index is the strongest level on record, with the greenback hitting multi-decade highs against currencies like the euro and the yen. The dollar is technically overbought, today the dollar index is down, the dollar is pulling back.
Until next Wednesday the market will likely trade in a narrow range. No key data on inflation this week.
PRICES @ 10:00 AM
10 yr note: 2.98% +6 bp
5 yr note: 3.09% +4 bp
2 Yr note: 3.16% +3 bp
30 yr bond: 3.14% +6 bp
Libor Rates: 1 mo 2.10%; 3 mo 2.737%; 6 mo 3.311%; 1 yr 3.896% (7/15/22)
30 yr FNMA 5.0: 101.39 -20 bp (+23 bp from 9:30 am Friday)
30 yr FNMA 4.5: 100.00 -25 bp (+22 bp from 9:30 am Friday)
30 yr GNMA 4.0: 99.61 -31 bp (+16 bp from 9:30 am Friday)
Dollar/Yuan: $6.7407 -$0.0167
Dollar/Yen: 138.19 -0.34 yen
Dollar/Euro: $1.0153 +$0.0066
Dollar Index: 107.35 -0.71
Gold: $1717.90 +$14.30
Bitcoin: 22,199 +1260
Crude Oil: $101.78 +$4.19
DJIA: 34,196 +195
NASDAQ: 11,598 +145
S&P 500: 3892 +29
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.