June 16th, 2022 1:30 PM by Richard Sardella MLO.100007700/NMLS 233568
FOMC meetings always generate huge levels of volatility, yesterday it didn’t disappoint. MBS prices exploded and the 10 yr. note declined. Late yesterday MBSs in thin market trading increased 120 bps (at 4 pm ET the 4.5 coupon +106 bp; the 5 coupon at 4 pm +48, ended +105 bp). The 10 yr. note at 4 pm yesterday -13 bps, at the close 3.29% -19 bp. The stock indexes rallied. Traders dumping those bearish trades. This morning it all flipped back; the 10 yr. at 8 am 3.43% +14 bp, early trading in MBSs down 72 bps. Early trading in the stock market, DJIA -475 after increasing 304 yesterday. Just about every technical indicator we use were in over sold conditions in the interest rate markets, markets correcting the extended situation now. Expect consolidation now for a week or so.
At 8:30 am weekly jobless claims, expected +220K increased 229K, the week before was revised from 229K to 232K with the revision down 3K from the week before. Claims are not as interesting now as job growth continues strong. The main event today is the May housing starts and permits, and the were weaker than forecasts. Starts expected at 1.695 mil dropped to 1.549 mil (July starts revised from 1.724 mil to 1.810 mil). Permits also less than forecasts of 1.780 mil dropped to 1.695 mil. Finally, at 8:30 am, the June Philadelphia Fed manufacturing index was expected at 5.5, it declined to -3.3.
Another central bank increased rates today, the Bank of England implemented a fifth consecutive hike to interest rates as it looks to rein in soaring inflation. It increased rates by 25 bps to 1.25% The vote was mixed, six voted yes three voted no, wanting a 50 bp increase. The statement saying that it will “take the actions necessary to return inflation to the 2% target sustainably in the medium term,” with the scale, pace and timing of any further hikes depending on the economic outlook and inflationary pressures. Sounds familiar, doesn’t it? Taiwan and Brazil also increased rates.
At 9:30 am the DJIA opened -610, NASDAQ -295, S&P -86. The 10 yr. note at 3.44% +15 bps, at the same level on Tuesday. FNMA 4.5 30 yr. coupon -102 bp and -35 bp from 9:30 am yesterday.
As we noted yesterday, the next few sessions are going to be volatile with prices swinging in wide ranges, yesterday the 10 dropped 18 bps, this morning up 13 bps and back to the highs of this increasing rate pattern. Already this morning MBS prices moving in wide ranges, at 9:30 am the 4.5 coupon -102 bps, at 9:45 am -87 bps.
PRICES @ 10:00 AM
10 yr note: 3.43% +15 bp
5 yr note: 3.50% +13 bp
2 Yr note: 3.28% +6 bp
30 yr bond: 3.46% +12 bp
Libor Rates: 1 mo 1.523%; 3 mo 2.029%; 6 mo 2.748%; 1 yr 3.612% (6/15/22)
30 yr FNMA 5.0: @ 9:30 100.13 -109 bp (-54 bp from 9:30 am yesterday)
30 yr FNMA 4.5: @ 9:30 98.45 -102 bp (-45 bp from 9:30 am yesterday)
30 yr GNMA 4.0: @9:30 97.97 -83 bp (-41 bp from 9:30 am yesterday)
Dollar/Yuan: $6.7121 -$0.0014
Dollar/Yen: 132.71 -1.12 yen
Dollar/Euro: $1.0460 +$0.0015
Dollar Index: 104.58 -0.58
Gold: $18632.70 +$13.10
Bitcoin: 20,967 -718
Crude Oil: $113.10 -$2.21
DJIA: 30,013 -665
NASDAQ: 10,794 -349
S&P 500: 3686 -104
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.