May 24th, 2022 9:14 AM by Richard Sardella MLO.100007700/NMLS 233568
Looking over the news this morning, there isn’t immediate news that is significant. The equity markets still look heavy, we doubt the indexes will turn around until the Fed comments inflation is trending lower and ends its monetary tightening. That isn’t likely though until there is more evidence that inflation has topped out, the key inflation measurements, CPI, PPI and PCE have continued to increase on a yearly basis but since March the three measurements have been lower than forecasts. Powell is not going to back off the expected two 50 bp FF increases over the next two meetings, but he could ease his language about inflation even as the Fed increases rates. On Friday April PCE will be released, with each of the three inflation gauges showing a slowing of inflation it is conceivable that markets can improve even as the Fed increases the FF rate. The current estimate for April PCE, yr./yr. 6.3% from 6.6% in March; yr./yr. core PCE expected 4.9% from 5.2% in March. If inflation continues to moderate it won’t stop the Fed from increasing rates, but it isn’t unusual markets can get ahead of the Fed.
At 9:30 am ET the DJIA opened -165, NASDAQ -208, S&P -40. 10 yr. at 9:30 am 2.79% -7 bps after increasing 7 bps yesterday. The FNMA 4.5 coupon at 9:30 am +22 bps from yesterday and +5 bps better than 9:30 am yesterday.
At 10 am April new home sales, expected at 750K units, down from 763K in March. Sales crumbled, 591K and March revised from 763K to 709K, yr./yr. -17% against -1.7% expected. The sharp decline boosted the fall in stocks.
At 1 pm this afternoon Treasury will auction $47B of 2 yr. notes.
The dollar has increased since the beginning of the year in an almost straight-line increase until the last three days, now the dollar is losing some of that momentum. A weakening dollar increases import prices and makes gold more affordable.
Today will be the same as has been the case for weeks, interest rates and MBS prices following the stock market. Opening lower this morning doesn’t predict how the indexes will trade this afternoon, there is a litany of days with high levels of volatility. Looking at most economists and analysts’ outlooks, the consensus remains bearish for the near term in equity markets.
In Davos Switzerland, the World Economic Forum where all the key global players, both government folks and a lot of private big wigs get together each year.
PRICES @ 10:00 AM
10 yr note: 2.75% -11 bp
5 yr note: 2.73% -14 bp
2 Yr note: 2.50% -11 bp
30 yr bond: 2.97% -10 bp
Libor Rates: 1 mo 1.006%; 3 mo 1.524%; 6 mo 2.062%; 1 yr 2.718% (5/23/22)
30 yr FNMA 4.0: @9:30 99.86 +22 bp (unch from 9:30 am yesterday)
30 yr FNMA 4.5: @9:30 101.52 +20 bp (+5 bp from 9:30 am yesterday) ***at 10:00 +44 bps
30 yr GNMA 4.0: @9:30 100.75 +8 bp (+8 bp from 9:30 am yesterday)
Dollar/Yuan: $6.6564 +$0.0057
Dollar/Yen: 126.56 -1.34 yen
Dollar/Euro: $1.0731 +$0.0039
Dollar Index: 101.95 -0.12
Gold: $1857.80 +$10.00
Bitcoin: 29,018 -271
Crude Oil: $110.97 +$0.68
DJIA: 31,593 -288
NASDAQ: 11,133 -402
S&P 500: 3896 -77
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.