July 25th, 2022 10:18 AM by Richard Sardella MLO.100007700/NMLS 233568
Last Thursday and Friday the 10 yr. note declined 26 bps and MBS prices jumped 90 bps (4.5 coupon). The FOMC will release the policy statement on Wednesday afternoon with an increase of 75 bps, totally expected. The markets gathering around the idea that the Sept FOMC meeting may be the last this year, a growing belief that inflation has peaked at 9.1% CPI in June and will slowly decline. Interesting, until recently the consensus had been that the Fed’s main inflation gauge was the PCE (personal consumption expenditures); now traders believe the Fed is more focused on the monthly CPI that increased 9.1% in June while the June PCE to be released on Friday is expected +6.7%. The equity markets were the usual volatile trade last week but the three key indexes managed a gain.
As the Federal Reserve prepares to meet this week, Wall Street investors are betting that officials will raise interest rates aggressively through the end of the year—and then turn around and start cutting them in six months. The Fed will raise its benchmark federal-funds rate by three-quarters of a percentage point on Wednesday. The Fed is subsequently expected to lift the fed-funds rate to around 3.3% by the end of the year. But investors expect no further increases after that.
The 10 yr. note began today up 4 bps, MBS prices -22 bps. No news today but there is a 2 yr. note auction at 1 pm ET. This week’s calendar is headlined by the FOMC but there a few other key data points; consumer confidence, U. of Michigan consumer sentiment, pending home sales, first look at Q2 GDP. Q2 is thought to show a slight improvement from Q1’s -1.6%, the idea that a recession is marked my two consecutive declines in GDP is floating around but all other facts and data on the economy is that we are already in a recession. The only positive now is employment remains strong… so far.
It is earnings season now; equity markets are focusing on every major company reporting generating some intraday volatility. Several major Wall Street firms commenting that so far earnings are not as soft as had been thought.
At 9:30 am the DJIA opened -38, NASDAQ -47, S&P -5. 10 yr. at 9:30 am 2.83% +5 bp, FNMA 4.5 30 yr. coupon at 9:30 am -16 bps from Friday’s close, -19 bp from 10 am Friday.
PRICES @ 10:00 AM
10 yr note: 2.84% +6 bp
5 yr note: 2.91% +5 bp
2 Yr note: 3.03% +4 bp
30 yr bond: 3.06% +6 bp
Libor Rates: 1 mo 2.252%; 3 mo 2.766% ; 6 mo 3.332%; 1 yr 3.814% (7/22/22)
30 yr FNMA 5.0: @9:30 101.77 -12 bp (-18 bp from 9:30 am Friday)
30 yr FNMA 4.5: @9:30 100.64 -16 bp (-19 bp from 9:03 am Friday)
30 yr GNMA 4.0: @9:30 100.08 -5 bp (-11 bp from 9:30 am Friday)
Dollar/Yuan: $6.7485 -$0.0028
Dollar/Yen: 136.51 +0.41 yen
Dollar/Euro: $1.0251 +$0.0035
Dollar Index: 106.30 -0.43
Gold: $1720.50 -$6.90
Bitcoin: 21,936 -814
Crude Oil: $95.67 +$0.97
DJIA: 32,009 +110
NASDAQ: 11,811 -$23.00
S&P 500: 3969 +8
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.