CHM Blog

Once again, this morning the 10 year note increased to 3.84% then backed off; at 9 am ET 3.78% -1 bp.

A lot of news at 8:30 am. May retail sales expected -0.1% increased 0.3% down from 0.4% in April, ex autos +0.1% from +0.4% in April. Weekly jobless claims were unchanged from the prior week at 262K as expected, the 4-week average 246.75K from 237.50K. May import prices -0.6% from +0.3% in April, year/year -5.9% from -4.9%. Export prices expected -0.3% declined 1.9%, year/year -10.1% from -6.0% in April. June Philadelphia Fed business index -13.7% from -10.4% in May. June Empire state manufacturing index expected -15.1 increased 6.6.

The ECB, as expected increased rates by 25 bps fighting inflation and indicated it isn’t done increasing rates. Inflation is slowing in Europe, traders talking about a pause at the next ECB meeting. Like the Fed, there is belief the ECB will pause at its July meeting. “The outlook for economic growth and inflation remains highly uncertain,” President Christine Lagarde told reporters in Frankfurt. “Inflation has been coming down but is projected to remain too high for too long.”

May retail sales were better than expected leading some comments that consumers are still strong, hard to admit for those believing the Fed won’t cause a recession and equity markets will continue to improve. I have always said, anyone can make statistics read any way they like; retail sales in May were weaker than in April. Consumer spending accounts for two-thirds of economic output. Retail sales are slowing but any small increase will be seen as a positive until it can’t be ignored any longer.

At 9:15 am May industrial production was expected to increase 0.1% from +0.5% in April, production decline 0.2%; capacity utilization thought to be 79.7% reported 79.6%.

At 9:30 am the DJIA opened -17, NASDAQ -56, S&P -9. 10 year 3.74% -5 bps. FNMA 6.0 30 year coupon at 9:30 am +7 bps and -1 bp from 9:30 am yesterday.

The economic outlook, regardless of the spin, is slowing. Inflation also slowing. Yesterday Jerome Powell continued to warn the Fed will continue to be vigilant, yet long term rates won’t increase, the 10 year note holding strong at 3.84%, the 200 day average and an increasing chart resistance, testing 3.84% almost daily since late May. The data today confirms the economy is slowing but is being downplayed by the bullish economic outlook that is driving equities. It is increasingly hard to face the reality. If traders and money managers are leaning to more rate increases the 10 would be trading at higher rates; it is reasonable to ponder that the Fed is finished increasing rates.

PRICES @ 10:00 AM

10 year note: 3.73% -6 bp

5 year note: 3.97% -6 bp

2 year note: 4.67% -2 bp

30 year bond: 3.83% -5 bp

Libor Rates: 1 month 5.158%; 3 month 5.508%; 6 month 5.651%; 1 year 5.818% (6/14/23)

30 year FNMA 6.0: @9:30 am 101.17 unch (+1 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 100.03 +20 bp (+14 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 100 .06 +14 bp (+20 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1401 -$0.0236

Dollar/Yen: 140.52 +0.43 yen

Dollar/Euro: $1.0890 +$0.0059

Dollar Index: 102.74 -0.22

Gold: $1953.60 -$15.30

Bitcoin: 24,972 +31

Crude Oil: $69.36 +$1.09

DJIA: 34,152 +174

NASDAQ: 13,632 +8

S&P 500: 4388 +16

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.

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