May 11th, 2023 9:04 AM by Richard Sardella MLO.100007700/NMLS 233568
April CPI yesterday showing less inflation; this morning PPI also shows less inflation than estimated. Month/month PPI expected +0.3%, up 0.2%, year/year 2.3% on estimates of 2.5%. The core, ex food and energy expected +0.2% month/month reported +0.2%; year/year 3.2% with forecasts of 3.3%. Yesterday CPI was the lowest in 2 years, the PPI this morning the lowest since the beginning od 2021. 80% of the monthly rise in the PPI was due to services. That included increases for portfolio management, food wholesaling and a handful of health care-related costs. Inflation is continuing to moderate and increasing the idea the Fed will pause its rate increases, at least at the June meeting. Still running hot though compared to what the fed’s aim is to get inflation down to 2.0%.
This morning Christine Lagarde, ECB, “Inflation has been too high and for too long,”… “The ECB is on a journey to fight inflation, and the fight is not over, and it will only be over when we have sufficient confidence that we will reach the 2% target in the medium term.” Bundesbank chief Joachim Nagel commenting that there is nothing off the table. Inflation in Europe much higher than in the US.
The Bank of England followed the Fed today, increasing its base rate to 4.5% from 4.25%. The Bank signaled more increases are possible as it released less gloomy forecasts for the U.K. economy. The ECB and BOE appear to be saying they will keep tightening while the Fed is inching close to a pause.
Also this morning weekly jobless claims, thought to be at 245K jumped to 264K.
At 9:30 am the DJIA opened -196, NASDAQ +12, S&P -10. 10 year at 9:30 am 3.36% -8 bps. FNMA 6.0 30 year coupon at 9:30 am +8 bps from yesterday and +19 bp from 9:30 am yesterday; the 5.5 coupon +9 bps and +17 bp from 9:30 am yesterday.
This afternoon Treasury will sell $21B of new 30s, yesterday’s 10 year auction was a little sloppy with bidding soft.
Too much in a short period; the 10 two days ago 3.51% this morning 16 bps lower. Two days ago, the 2 year note traded at 4.05%, this morning 3.82%. The fierce debate that existed prior to yesterday whether the Fed would pause next month appears to be resolved, no increase at the June meeting.
PRICES @ 10:00 AM
10 year note: 3.37% -7 bp
5 year note: 3.30% -10 bp
2 year note: 3.82% -9 bp
30 year bond: 3.74% -6 bp
Libor Rates: 1 month 5.108%; 3 month 5.342%; 6 month 5.398%; 1 year 5.535% (5/10/23)
30 year FNMA 6.0: @9:30 am 101.91 +8 bp (+19 bp from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 100.97 +9 bp (+17 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 100.69 +5 bp (+24 bp from 9:30 am yesterday)
Dollar/Yuan: $6.9466 +$0.0133
Dollar/Yen: 134.23 -0.13 yen
Dollar/Euro: $1.0904 -$0.0078
Dollar Index: 102.05 +0.58
Gold: $2025.90 -$11.20
Bitcoin: 27,301 -594
Crude Oil: $71.32 -$1.24
DJIA: 33,141 -390
NASDAQ: 12,289 -17
S&P 500: 4112 -25
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.