March 17th, 2022 9:41 AM by Richard Sardella MLO.100007700/NMLS 233568
The Fed did what was expected yesterday. This morning there has been a little volatility in early and overnight trading, the 10 last night started where the US trading ended at 2.19%, declined to 2.11% and by 9 am ET back to 2.16% down 3 bps from yesterday, MBS prices +11 bps. The past two sessions the DJIA increased 1100 points, this morning indexes were weaker in futures trade prior to the 9:30 am open.
The FOMC statement and Powell’s press conference confirmed what many were anticipating, at least six 25 bp increases this year. We have been eyeing the difference between the 10 and 5 yr notes over the last week as the two moved closer together, yesterday the yield on the 5 yr briefly exceeded the 10 yr rate, the 2-10 spread has narrowed to 22 bps from 78 bps at the beginning of the year. While the 5-10 spread is interesting the spread between the 2 and 10 carries significant weight, if the two invert the takeaway would be that the economic outlook was expected to decline. What we expect is continuing volatility in fixed income markets.
At 8:30 am Feb housing starts and permits; starts were expected at 1.700 mil, as reported 1.769 mil +6.8%, permits thought to be 1.850 mil increased to 1.859 mil. The increase in starts, the highest since 2006 possibly indicates the supply problems that have plagued builders may be ebbing. Skilled workers, higher interest rates still hampering the housing industry.
Other data at 8:30 am; weekly jobless claims down 15K to 214K from 229K the week before, estimates were 221K. The March Philadelphia Fed manufacturing index expected at 15.0 increased to 27.4 (Feb 16.0).
At 9:15 am Feb industrial production was in line with forecasts, +0.5%. Capacity utilization at factories rose in February to 78%, the highest since 2018, from 77.1% a month earlier. Global supply chains and soaring materials costs continue to complicate the industrial recovery.
At 9:30 am the DJIA opened -130, NASDAQ -92, S&P -19. 10 yr 2.16% -3 bps. FNMA 4.0 30 yr coupon at 9:30 am +8 bps and -18 bps frm 9:30 am yesterday.
The UK raised its key interest rate for the third time in as many policy meetings today, a fresh sign that central banks in many parts of the world are giving priority to countering a surge in inflation. The BOE lifted its key rate to 0.75% from 0.5%. “Global inflationary pressures will strengthen considerably further over coming months, while growth in economies that are net energy importers, including the United Kingdom, is likely to slow,” the BOE said.
So far this morning markets are generally unchanged. The long end of the yield curve is technically oversold for the moment and should hold up today; that said interest rates are headed higher, any improvements are technical not fundamental.
PRICES @ 10:00 AM
10 yr note: 2.18% -1 bp
5 yr note: 2.15% -4 bp
2 Yr note: 1.93% -2 bp
30 yr bond: 2.46% unch
Libor Rates: 1 mo 0.468%; 3 mo 0.948%; 6 mo 1.257%; 1 yr 1.715% (3/16/22)
30 yr FNMA 3.5: @ 9:30 100.78 +13 bp (-6 bp from 9:30 am yesterday)
30 yr FNMA 4.0: @9:30 102.77 +8 bp (-18 bp from 9:30 am yesterday) @10:00 +16 bp
30 yr GNMA 3.5: @9:30 101.63 +2 bp (-7 bp from 9:30 am yesterday)
Dollar/Yuan: $6.3499 -$0.0024
Dollar/Yen: 118.77 unch
Dollar/Euro: $1.1072 +$0.0037
Dollar Index: 98.32 -0.30
Gold: $1944.00 +$34.80
Bitcoin: 41,145 +459
Crude Oil: $101.93 +$6.89
DJIA: 34,076 +13
NASDAQ: 13,483 +47
S&P 500: 4367 +10
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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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.