CHM Blog

Treasury yields increased yesterday and early this morning more selling, the 10 at 3.24% +3 bps, MBS prices -16 bps at 8:30 am ET. Stock indexes prior to the 9:30 am open generally better. U.S. stock futures gained as investors assessed the impact that China’s loosening Covid-19 restrictions would have on global supply chains. By 9:30 am MBS prices were unchanged from yesterday.

Not much direct news overnight. Goldman Sachs warning that profit margins that are currently priced in markets may be too excessive, putting stocks at risk of more declines when Wall Street analysts downgrade their expectations. “While rotations within the equity market have signaled expectations of slowing growth, index valuation does not appear to be providing a buffer for the uncertainty around the path of future earnings,” strategists led by Ben Snider wrote. Profit margins for the median S&P 500 company will likely decline next year, whether the economy falls into recession, the strategists said.

The ECB will increase interest rates at its July meeting according to ECB Pres. Christine Lagarde. The European Central Bank will activate the bond-purchasing firepower it’s earmarked as a first line of defense against a possible debt-market crisis on Friday, according to President Christine Lagarde. The ECB worrying about a potential panic over how reinvestments from the ECB’s 1.7 trillion-euro ($1.8 trillion) pandemic bond-buying portfolio are allocated is aimed at curbing unwarranted turmoil in government bonds as interest rates are lifted from record lows to curb unprecedented inflation. The ECB annual meeting taking place in Portugal this week. While describing the risk of a recession in the 19-member euro area as “non-trivial,” Governing Council member Martins Kazaks said rates can be raised “quite quickly” and called front-loading hikes -- including a possible July move beyond the planned quarter-point -- “reasonable.” Tomorrow Jerome Powell is scheduled to speak at the European Central Bank (ECB) Forum on Central Banking 2022, Sintra, Portugal

May advance US trade deficit this morning increased to -$104.3B against estimates of -$102.0B.

At 9 am April Case/Shiller home price m/m increased 2.3%, from 3.1% last month, yr./yr. +20.4%% down from 20.6% in March. Demand to purchase homes continues to exceed the limited inventory of homes for sale. Nearly 60% of the homes sold in May were sold above their list price, according to real-estate brokerage Redfin Corp.

At 9:30 am the DJIA opened +172, NASADAQ +35, S&P +22. 10 yr. at 9:30 am 3.22% +1 bp. FNMA 4.5 30 yr. coupon at 9:30 am -2 bps and -10 bps from 9:30 am yesterday; the 5.0 30 yr. coupon at 9:30 am unchanged from yesterday and -14 bps from 9:30 am yesterday.

At 10 am June consumer confidence index from the Conference Board, was expected at 101.0 from 106.4 in May, the index as reported 98.7; May revised to 103.2 from 106.4. Confidence sinking, seeing it in the U. of Michigan consumer sentiment index also.

At 1 pm Treasury will auction $40B of 7 yr. notes; the 2 and 5 yr. auctions yesterday were sloppy with rates at the auctions were higher than the trading in the WI markets prior to the auctions.

PRICES @ 10:00 AM

S&P 500: 3930 +30

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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