May 20th, 2022 8:44 AM by Richard Sardella MLO.100007700/NMLS 233568
Stock indexes started a little better this morning, the 10 yr. note at 2.84% -1 bp, FNMA 4.5 30 yr. coupon -11 bps. There are no economic releases today, even if there was the only focus is on the stock market. Data is important but these days data is filed away for another time with stock indexes teetering on bear market levels. The indexes declined yesterday sending the 10 yr. at one point down to 2.78% before ending at 2.85%. Not news, it is all safety concerns, otherwise the bellwether 10 yr. note would likely by 10 bps higher.
China, trying to buoy up its economy, cut a key interest rate for long-term loans by a record amount, a move that would reduce mortgage costs and may help counter weak loan demand caused by a property slump and Covid lockdowns. The five-year loan prime rate, a reference for home mortgages, was lowered to 4.45% from 4.6%, according to a statement by the People’s Bank of China Friday. That was the largest reduction since a revamp of the rate in 2019. Most economists surveyed by Bloomberg had predicted a cut by five to 10 basis points. The one-year loan prime rate -- the de facto benchmark lending rate -- was kept unchanged at 3.7% on estimates of a cut of five to 10 bps. China’s coronavirus lockdowns mean its economic growth may undershoot the US for the first time since 1976, estimates for the US, gross domestic product will increase 2.8% this year.
Russia’s inflation running twice as high than in the west, the Ukraine war pressing consumers much more than the rest of the western world.
The ECB may increase rates in July according to Governing Council member Ignazio Visco. If, when, the ECB does increase rates it will be the first rate hike in more than 10 yrs. Money-market wagers on ECB policy tightening were broadly steady, pricing 34 basis points of rate hikes by July and four quarter-point increases by year-end. The Bundesbank reiterated Friday that a first rate hike could happen in July, citing the need to ensure current price pressures don’t become entrenched. He said further increases “could follow shortly thereafter.” Euro-zone inflation was 7.4% from a year ago last month, holding at an all-time high, data released this week showed.
While interest rates are presently being driven by equity markets, technicals are still interesting. The 10 yr. note is trading at its 40-day moving average, only four days since the beginning of the year has the note traded below it (March 1st, 2nd, 3rd, and 4th).
At 9:30 am ET the DJIA opened +166, NASDAQ +143, S&P +32. 10 yr. note 2.87% +2 bp. FNMA 4.5 30 yr. coupon at 9:30 am -9 bps and -9 bps from 9:30 am yesterday.
PRICES @ 10:00 AM
10 yr note: 2.85% unch
5 yr note: 2.86% +1 bp
2 Yr note: 2.64% +3 bp
30 yr bond: 3.06% -1 bp
Libor Rates: 1 mo 0.961%; 3 mo 1.505%; 6 mo 2.056%; 1 yr 2.706% (5/19/22)
30 yr FNMA 4.0: @9:30 99.73 -3 bp (-2 bp from 9:30 am yesterday)
30 yr FNMA 4.5: @9:30 101.33 -9 bp (-11 bp from 9:30 am yesterday)
30 yr GNMA 4.0: @9:30 100.52 +3 bp (+19 bp from 9:30 am yesterday)
Dollar/Yuan: $6.6839 -$0.0294
Dollar/Yen: 128.07 +0.25 yen
Dollar/Euro: $1.0560 -$0.0025
Dollar Index: 103.02 +0.30
Gold: $1838.90 -$2.30
Bitcoin: 30,301 +87
Crude Oil: $113.34 +$1.13
DJIA: 31,411 +158
NASDAQ: 11,479 +90
S&P 500: 3928 +27
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.