CHM Blog

Prior to 8:30 am ET the 10 year note traded at 3.89% +5 bps from yesterday’s close at 3.84%. Yesterday the 10 year note increased 13 bps, MBS prices -42 bps.

At 8:30 am the PCE inflation release; expected month/month at 0.1% as reported +0.1%, year/year PCE thought to be 3.8%, as reported +3.8%. The core PCE, the key inflation reading, expected +0.4% was +0.3%; year/year 4.6% with forecasts of 4.7%. The core down 0.1% from April. May personal income increased 0.4% as expected, personal spending forecasts at +0.2%, as reported +0.1%. The price increases over the past year slowed to 3.8% from 4.3% and dropped to the lowest level in two years. Waning gas and food prices have played a big role in restraining inflation this year. Powell and other major central bankers met to talk about some coordination between them about inflation outlooks around the world. Today’s lack of inflation increase doesn’t change the idea of another rate increase.

The initial reaction pushed the 10 down from 3.89% to 3.84% unchanged from yesterday’s close, MBS prices +9 bps. Stock indexes in futures trading traded higher before 8:30 am then added more gains after the data, at 9 am the DJIA +167, S&P +28.

At 9:30 am the DJIA opened +180, NASDAQ +128, S&P +31. 10 year note 3.84% unchanged from yesterday. FNMA 6.0 30 year coupon +5 bps and +3 bps from 9:30 am yesterday; FNMA 5.5 coupon +8 bp and +5 bps from 9:30 am yesterday.

At 9:45 am the June Chicago purchasing managers index, expected at 44.2 from 40.4 in May, the index at 41.5 disappointing and under 50 continues to reflect contraction in the manufacturing sector. Next week both June ISM manufacturing and service sector indexes AND next week has June employment data on Friday.

At 10 am the U. of Michigan consumer sentiment index, expected unchanged from mid-month at 63.9, as released 64.4, the second best this year but not as strong as the Conference Board’s consumer confidence data reported last Tuesday.

With the long weekend and little unexpected news look for the bonds to trade quietly. PCE at 4.6% still over two times higher than what the Fed is targeting (2.0%).

Key economic data next week, June employment on Friday.

PRICES @ 10:00 AM

10 year note: 3.83% -1 bp

5 year note: 4.13% unch

2 year note: 4.88% +1 bp

30 year bond: 3.89% -1 bp

Libor Rates: N/A

30 year FNMA 6.0: @9:30 am 100.83 +5 bp (+3 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 99.48 +8 bp (+5 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 99.50 +8 bp (unch from 9:30 am yesterday)

Dollar/Yuan: $7.2586 +$0.0060

Dollar/Yen: 144.35 -0.44 yen

Dollar/Euro: $1.0918 +$0.0055

Dollar Index: 102.91 -0.44

Gold: $1919.50 +$3.60

Bitcoin: 30,122 -286

Crude Oil: $70.35 +$0.50

DJIA: 34,388 +272

NASDAQ: 13,787 +196

S&P 500: 4441 +48

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.