July 21st, 2022 9:00 AM by Richard Sardella MLO.100007700/NMLS 233568
The ECB met today, as expected the bank increased its rate by 50 bps, the first increase in 11 years and the biggest since 2000 as it confronts surging inflation even as recession risks mount. ECB finally joins other key central banks increasing its rate, ends an eight-year experiment with subzero borrowing costs. In its statement the ECB said that further normalization of interest rates will be appropriate at upcoming meetings. The bank said it will establish the Transmission Protection Instrument, which “can be activated to counter unwarranted, disorderly market dynamics.” Purchases aren’t restricted “ex ante.” The hike in the deposit rate to 0% was twice the amount telegraphed until just days ago and was predicted by only four of 53 economists surveyed by Bloomberg. Will our central bank also surprise by increasing the FF rate by 100 bps next Wednesday? Probably not, the ECB must catch up with 80 international peers, including the US Federal Reserve, in lifting rates this year to fight red-hot inflation after months of predicting such pressures would fade. Consumer prices in the euro area are now rising by more than four times its 2% target.
In early trading today the stock indexes generally unchanged, the 10 yr. note 3.04% +1 bp and MBS prices also unchanged; but by 9:30 am ET the 10 declined to 2.99% -4 and MBS prices +19 bps from yesterday .
At 9:30 am the DJIA opened -109, NASDAQ +110, MBSs +19 bps from yesterday and -11 bp from 9:30 am yesterday.
Weekly jobless claims this morning continued to creep higher, expected at 240K claims increased 251K +7K from the week before. Claims at an eight month high; continuing claims up 51K to 1.38 mil, the largest since last November. The jobless claims four-week moving average, a measure which smooths out some of the volatility in the series, ticked up to 240,500, the highest since early December. The importance of the report is that it reflects some loosening in a tight labor market that will temper some of the payroll growth expectations for July, as this report covered the period in which the survey for the July Employment Situation Report was conducted.
The July Philadelphia Fed business index plunged, -12.3 with forecasts of +0.4 and down from -3.3 in June.
June leading economic indicators expected -0.5% declined 0.8%.
PRICES @ 10:00 AM
10 yr note: 2.99% -4 bp
5 yr note: 3.11% -6 bp
2 Yr note: 3.20% -4 bp
30 yr bond: 3.12% -4 bp
Libor Rates: 1 mo 2.214%; 3 mo 2.759%; 6 mo 3.333%; 1 yr 3.893% (7/21/22)
30 yr FNMA 5.0: @9:30 101.39 +13 bp (-9 bp from 9:30 am yesterday)
30 yr FNMA 4.5: @9:30 100.09 +19 bp (-11 bp from 9:03 am yesterday)
30 yr GNMA 4.0: @9:30 99.42 +20 bp (-7 bp from 9:03 am yesterday)
Dollar/Yuan: $6.7700 +$0.142
Dollar/Yen: 138.39 +0.13 yen
Dollar/Euro: $1.0180 -$0.0003
Dollar Index: 107.19 +0.09
Gold: $1701.90 +$1.70
Bitcoin: 22,648 -1,201
Crude Oil: $96.38 -$3.50
DJIA: 31,793 -79
NASDAQ: 11,923 +25
S&P 500: 3961 +1
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.