May 23rd, 2022 9:32 AM by Richard Sardella MLO.100007700/NMLS 233568
Last Friday the stock indexes ended generally unchanged on the day; the 10 note dropped 6 bps to 2.79% and MBS prices were up 17 bps. This morning stock indexes at 8 am ET were better, the DJIA +310, NASDAQ +70. It is the same pattern we have been dealing with for a month; stocks better, interest rates higher, the 10 at 8 am 2.84% +5 bp and MBS prices began -23 bps.
On Wednesday, the minutes from the May FOMC will be released. Markets always pay attention, this time looking for more confidence that the Fed will increase the FF rate by 50 bps in June and July. St. Louis Fed President James Bullard said the central bank should front-load an aggressive series of rate hikes to push rates to 3.5% at year’s end, which if successful would push down inflation and could lead to easing in 2023 or 2024. Markets presently are expecting two 50 bp increases at two consecutive meetings. Powell, every time he speaks has been “certifying” the FOMC’s plans.
Starting the week there are two very key releases; Wednesday FOMC minute, Friday the PCE inflation report, PCE as you know, is the Fed’s favorite inflation look. The forecasts once again are looking for cooling on inflation. The CPI and PPI in March and April and PCE in March all were higher but all were lower than estimates. Even a slowing in inflation isn’t likely to change the Fed plans to increase the FF rate by 100 bps over the next two FOMC meetings. The Fed has fallen behind, now Powell and other Fed officials have been very clear the FF rate will increase no matter present inflation data.
Equity markets in a tug of war; after the huge selling over the last month there appears to be an even divide between those that see present levels an important level to buy, thinking the worst is mostly over. The other side, and there is as many that are looking for more declines. The balance creating volatility from day to day. Last week the DJIA was down 935 points although from a day to day trade it seemed like it was worse, the same with NASDAQ for the week, -451 and S&P -123.
At 9:30 am the DJIA opened +291, NASDAQ +43, S&P +29. 10 yr. 2.83% +4 bp. FNMA 4.5 30 yr. coupon -12 bps and +13 bp from 9:30 am Friday.
Nothing different today, rate markets will follow stock indexes. So far, and its early, stock indexes are improving from opening levels.
PRICES @ 10:00 AM
10 yr note: 2.82% +3 bp
5 yr note: 2.83% +2 bp
2 Yr note: 2.60% +2 bp
30 yr bond: 3.01 % +1 bp
Libor Rates: 1 mo 0.974%; 3 mo 1.506%; 6 mo 2.066%; 1 yr 2.730% (5/20/22)
30 yr FNMA 4.0: 99.86 -11 bp (+13 bp from 9:30 am Friday)
30 yr FNMA 4.5: 101.47 -12 bp (+13 bp from 9:30 am Friday)
30 yr GNMA 4.0: 100.67 -11 bp (+15 bp from 9:30 am Friday)
Dollar/Yuan: $6.6506 -$0.0424
Dollar/Yen: 127.60 -0.28 yen
Dollar/Euro: $1.0660 +$0.0096
Dollar Index: 102.30 -0.85
Gold: $1852.60 +$10.50
Bitcoin: 30, 334 +424
Crude Oil: $110.77 +$0.45
DJIA: 31,524 +262
NASDAQ: 11,337 -18
S&P 500: 3917 +16
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.