CHM Blog

Daily Market Analysis May 3, 2022

May 3rd, 2022 8:32 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

Yesterday the 10 yr. note yield hit 3.00% then ended the US session at 2.99%, overnight the note ran to 3.01%, at 9 am ET this morning 2.96% -3 bp from the US close yesterday. MBS prices were -34 bps at 4 pm but ended the day -22 bps. The FOMC starts the meeting today.

Nothing of significance today that will move markets much with tomorrow’s FOMC policy statement and Powell’s press conference. A 50 bp increase in the FF rate is baked in the strudel. Germany’s benchmark rate rose above 1% for the first time since 2015, before pulling back, while the corresponding yield on U.K. bonds climbed above 2% this morning. Australian bonds slid after the nation’s central bank increased borrowing costs by more than many had expected to 3% the highest since 2014. The Bank of England this week is expected to raise interest rates to a 13-year high and clarify plans for selling its government-bond holdings. Global interest rates all headed higher as inflation is expected to continue until global economies slow and edge to possible recessions.

The FOMC meeting tomorrow, always important, takes on even more interest. No question the Fed is prepared to drive inflation back, but by how much and Powell has made it clear the Fed will begin shrinking its balance sheet. Two weeks ago it was the belief that there would be 50 bp increases the next three FOMC meeting, now though there has been some wiggling that the Fed may not increase as much as was being talked about. Easy to talk the talk until its time to walk. Inflation still increasing but at a lessor rate than what had been thought. The economy already seeing softness with consumers beginning to slow buying at the high prices.

At 9:30 am the DJIA opened +32 NASDAQ -32, S&P +1. 10 yr. at 9:30 am 2.93% -6 bp from the US close yesterday. FNMA 4.5 30 yr. coupon +9 bps and +20 bp from 9:30 am yesterday.

No key data today; March factory orders expected to have increased 1.1%, as reported +2.2%. March JOLTS job opening expected at 11.270 mil, as released 11.549 mil.

One of more influential economists, and former International Monetary Fund chief economist Kenneth Rogoff, saying the Fed will have to raise interest rates to as much as 5% to ease the hottest inflation in four decades just as the world faces a “perfect storm” of potential recessions in the U.S., European Union and China. The idea that increasing rates to just 2% or 3% will slow price growth “is really unlikely -- I think they’re going to have to raise interest rates to 4% or 5% to bring inflation down to 2.5% or 3%,”… “There’s just a lot of uncertainty. I’m not going to say I know exactly what needs to be done. But it’s clear that things are way out of control.” … “risks of having a perfect storm” of recessions, where European economic growth contracts because of Russia’s war in Ukraine, China’s does the same due to “a failed Covid lockdown policy,” and the U.S. economy shrinks because the Fed “tightens too much, too fast.”… “If China has a supply recession, which is really what we’re talking about, that’s going to feed inflation, it’s going to hurt demand in Europe,” Rogoff said. “I would say the risk has risen palpably, that this might happen,” he said of a U.S. economic contraction that would hit global financial markets... “Things could work out well, and so there’s a lot of uncertainty -- but it’s not hard to see all of these risks,” he said, adding that China “might already be bordering on recession.”

Today investors and traders will spend the day balancing positions ahead of the Fed tomorrow.

PRICES @ 10:00 AM

10 yr note: 2.93% -6 bp

5 yr note: 2.96% -3 bp

2 Yr note: 2.71% unch

30 yr bond: 2.98% -7 bp

Libor Rates: 1 mo 0.803%; 3 mo 1.335%; 6 mo 1.911%; 1 yr 2.629% (5/2/22)

30 yr FNMA 4.0: @9:30 99.20 +13 bp (+26 bp from 10:00 am yesterday)

30 yr FNMA 4.5: @9:30 101.39 +9 bp (+20 bp from 10:00 am yesterday)

30 yr GNMA 4.0: @9:30 99.94 +8 bp (+21 bp from 10:00 am yesterday)

Dollar/Yuan: $6.6080 unch

Dollar/Yen: 129.87 -0.31 yen

Dollar/Euro: $1.0552 +$0.0043

Dollar Index: 103.24 -0.51

Gold: $1868.10 +$4.50

Bitcoin: 38,331 unch

Crude Oil: $104.10 -$1.09

DJIA: 33,074 +13

NASDAQ: 12,544 +8

S&P 500: 4160 +5

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on May 3rd, 2022 8:32 AM

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