June 7th, 2022 9:59 AM by Richard Sardella MLO.100007700/NMLS 233568
The 10 yr. note increased to 3.04% +10 bp, MBS prices dropped 42 bps. This morning some improvement, at 8:30 am ET the 10 at 3.01% down 3 bps and MBS prices up 11 bps.
There are no significant data points today, that is the case until Friday when May CPI is reported. This afternoon at 1 pm Treasury will auction $44B of 3 yr. notes, at 3 PM April consumer credit.
Yesterday we said inflation has likely peaked, increasing data supports that contention. As previously noted, since March three key indicators on inflation have ended their increases (CPI, PPI, and PCE) have increased but less than forecasted and less than the prior months. Today Bloomberg has an article that adds a little to the idea that while inflation isn’t declining, it is slowing its assent. Though few forecasters are predicting a return to pre-pandemic prices in the short run, global retail giants like Wal-Mart Inc. are now struggling to unload bloated inventory to a less enthusiastic shopper. So, a moderation in those supply-side pressures could eventually allow central bankers to slow their tightening cycles. China’s producer prices peaked in late 2021 and are beginning to moderate. Economists are forecasting a 6.5% rise in factory prices in May from a year earlier, down from 8% in April. Lower container freight rates and improving supplier delivery times in purchasing managers indexes point to easing bottlenecks that should curb price pressures later this year. The cost of semiconductors of finished electronics products as diverse as laptops, dishwashers, LED bulbs, and medical devices delivered worldwide -- is now half its July 2018 peak and down 14% from the middle of last year.
The evidence presently tilts to moderation in inflation, we’ll see Friday when May CPI is reported; current estimates (m/m +0.7% from +0.3%, yr./yr. +8.2% from +8.3%; core CPI m/m +0.5% from +0.6%, yr./yr. +5.9% from +6.2%). The Fed will increase the FF rate by 100 bps in June and July (50 bp each meeting). Those increases are reflected in present levels of rates. Next Wednesday the FOMC meeting should provide more information as to what the Fed thinks now, FOMC members presently debating within themselves whether to increase the FF rate at the September meeting.
April US trade deficit at -$87.1B shrunk in April by the most on record in dollar terms, reflecting a drop in the value of imports amid Covid lockdowns in China while exports climbed. The gap in goods and services trade narrowed $20.6B, or 19.1%.
At 9:30 am the DJIA opened -251, NASDAQ -132, S&P -35. 10 yr. 3.00% -3 bps. FNMA 4.5 30 yr. coupon at 9:30 am +16 bps and -17 bps from 9:30 am yesterday.
Janet Yellen to appear before the Senate Finance Committee today, and tomorrow at the House Ways and Means Committee as she and the Biden administration face scrutiny over high inflation and how they have addressed it and discuss the administration’s annual budget request. With inflation running at above 8% on an annual basis, the highest rate in four decades, she is also expected to face questions about rising prices, which the Biden administration has said is its top economic priority.
PRICES @ 10:00 AM
10 yr note: 2.99% -5 bp
5 yr note: 2.99% -5 bp
2 Yr note: 2.71% -1 bp
30 yr bond: 3.15% -5 bp
Libor Rates: 1 mo 1.160%; 3 mo 1.665%; 6 mo 2.188%; 1 yr 2.852%
30 yr FNMA 4.0: 99.34 +14 bp (-25 bp from 9:30 am yesterday)
30 yr FNMA 4.5: 101.11 +16 bp (-17 bp from 9:30 am yesterday)
30 yr GNMA 4.0: 100.45 +14 bp (-19 bp from 9:30 am yesterday)
Dollar/Yuan: $6.6743 +$0.0204
Dollar/Yen: 132.57 +0.69 yen
Dollar/Euro: $1.0688 -$0.0005
Dollar Index: 102.68 +0.25
Gold: $1847.50 +$3.80
Bitcoin: 29,585 -1847
Crude Oil: $118.40 -$0.10
DJIA: 32,720 -197
NASDAQ: 11,999 -63
S&P 500: 4102 -19
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.