CHM Blog

The 10 began 3 bps higher at 3.61%, MBS prices at 8:30 am ET -27 bps (yesterday at the very end of the session MBS prices closed about unchanged after being down 19 bps at 4 pm). Stock indexes in pre-opening trading were unchanged from yesterday.

At 2 pm FOMC is expected to be increased 25 bps, at 2:30 pm Powell will hold his usual press conference, although this one is going to more interesting than usual. What will he say about the banking issues, about any softening of increases and how will the Fed attack inflation going forward? Don’t look for concrete answers; inflation is slowing but well above 3.0% that the Fed has been targeting for a year now. The Fed’s next move will signal whether the fight against inflation trumps fears of financial instability from the banking fallout in recent weeks. While most economists expect a quarter-point interest-rate hike, some say policymakers should pause to shore up financial stability. The swap markets pricing an 80% chance of an increase, the ECB raised last week clearing the way for the Fed. The troubled banks opened lower this morning in the stock market, the angst has slowed the last couple of days.

Beside the policy statement this afternoon the Fed will release its quarterly projections for the economic outlook and new interest rate forecasts, inflation, GDP growth, for the next two years. The forecasts have to taken with that grain of salt now with the present concerns about banks and increasing forecasts of a coming recession. Until now the FOMC hasn’t faced a dual crisis, inflation fighting was the battle, now inflation and a credit crisis is developing as a second battle front. “If you do crisis management correctly, you should have a freer hand to do monetary policy,” said Vincent Reinhart, chief economist at Dreyfus and Mellon and a former senior Fed economist. “To deflect what you think is the right path of monetary policy because you’re worried about financial stability is to admit you’re not doing regulation, supervision, and crisis management correctly. I don’t think the Fed thinks that, in which case they have a free hand” to raise interest rates this week.

Weekly MBA mortgage applications last week +3.0%, purchase apps +2.2%, re-finance apps +4.9%. The prior week +6.5%, purchases +7.3% and re-finances +4.8%.

At 9:30 am the DJIA opened flat, the DJIA +28, NASDAQ -5, S&P -1. 10 year at 9:30 am 3.62% +1 bp. FNMA 6.0 30 year coupon at 9:30 am -8 bps and +13 bp from 9:30 am yesterday. The 5.5 coupon -17 bps and +13 bps from 9:30 am yesterday.

Continue the battle on inflation or hold steady with the present uncertainty about the financial system. The system is fine but going forward credit concerns will likely curb borrowing.

PRICES @ 10:00 AM

S&P 500: 4001 -3

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.