CHM Blog

Late Friday afternoon Moody’s lowered its credit score on the US below the top triple-A level, citing a years-long pattern of rising debt and budget deficits, from Aaa to Aa1. Moody's is the last rating agency to lower US credit rating. The others including Fitch had already worsened US ratings. Its all about the climbing US debt, we have noted it many times here. Congress is working through Trump’s Bill that will add trillions more to the US debt according to analysts. The ratio of total US public debt to the size of the economy has risen from about 35% in 2007 to 100% now, according to the Congressional Budget Office. Interest payments alone were about $880B in 2024, CBO data show.

The initial reaction this morning is driving long term rates higher, the 10 year note opened +7 bps to 4.56%, MBS prices at 8:30 am ET -34 bps from Friday. Stock indexes lower but not excessively given the rate cut. Most of the rate increase is at the long end of the curve, investors holding US debt will have to pay more due to the costs of rolling over the debt held. Speaking about equity markets, “While this is historic and will attract media attention, its market impact is likely to be contained,” said Mohamed El-Erian, chief economic advisor at Allianz. Treasury Secretary Bessent called the Moody's downgrade a "lagging indicator" referring to the increasing income to treasury through the increasing tariffs.

The 10 year note yield this morning, the highest since the middle of February. Expect increased volatility today and through the week; an early close in the bond market Friday, equity markets go the regular hours. The dollar taking a beating this morning on the credit rating increase. There are no key economic releases this week. Fed officials talking every day. At 8 am the 10 year note +7 bps, 10 am +4 bps; MBS prices at 9:30 am -28 bp, at 10 am -22 bps. It was a shock that Moody's lowered the US credit rating but the rating has been lowered since 2023 so Moody’s is just catching up.

PRICES @ 10:00 AM

10 year note: 4.52% +3 bp

5 year note: 4.11% +2 bp

2 year note: 4.00% -1 bp

30 year bond: 4.99% +4 bp

30 year FNMA 6.0: @9:30 am 100.46 -28 bp (-49 bp from 9:30 am Friday)

30 year FNMA 6.5: @9:30 am 102.31 -20 bp (-33 bp from 9:30 am Friday)

30 year GNMA 6.0: @9:30 am 100.45 -19 bp (-40 bp from 9:30 am Friday)

Dollar/Yen: 145.05 -0.59 yen

Dollar/Euro: $1.1251 +$0.0085

Dollar Index: 100.29 -0.80

Gold: $3,233.10 +$45.90

Bitcoin: 103,023 -922

Crude Oil: $62.20 -$0.29

DJIA: 42,601 -54

NASDAQ: 19,065 -147

S&P 500: 5928 -31

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.