May 5th, 2022 9:20 AM by Richard Sardella MLO.100007700/NMLS 233568
Early this morning the 10 was up 1 bps, MBS prices up 2bps and stock indexes slightly lower.
What a day yesterday, the FOMC always sets off volatility, yesterday was no different, particularly in MBSs. The 10 yr. note once again tested 3.00%, once again it held and ended yesterday down 5 bps to 2.92%. The action in MBS traction swung from -40 bps immediately after the FOMC statement, once Powell finished his press conference MBSs went from -40 to +60 bps.
The Fed increased the FF rate by 0.50%, today the Bank of England increased its rate by 0.25% to 1.00%, the highest rate since 2009. Three of the nine members wanted an even higher increase. At the Bank of England meeting today said it will start selling off its 20 billion-pound ($24.9B) corporate bond portfolio in September, unwinding support for the credit market in place since the aftermath of the Brexit referendum. The BOE issued the gloomiest outlook of any major central bank this year, warning Britain to brace for double-digit inflation and a prolonged period of stagnation or even recession. While the bank predicts the U.K. will avoid a technical recession -- two consecutive quarters of contraction -- it said output will collapse by close to 1% in the final quarter of this year. In 2023, annual GDP is expected to shrink by 0.25%. European Central Bank Executive Board member Fabio Panetta said economic expansion has almost ground to a halt in the euro area and faces further “high costs”. Bigger-than-normal hikes this week in the U.S., India, and Australia.
At 8:30 am ET weekly jobless claims were expected at 178K filings, as reported 200K filed, up 19K from the prior week. Q1 preliminary productivity and unit labor costs; productivity declined 7.5% with estimates at -2.5%, the prior forecast was revised from 6.6% to +6.3%. When productivity drops unit labor costs increase, expected +6.8% labor costs increased 11.6% and the prior report also revised, from +0.3% to +1.0%. Another view on inflation, weak productivity, and surprisingly high labor costs.
At 9:30 am the DJIA opened -276, NASDAQ -187, S&P -44. 10 yr. note at 9:30 jumped to 3.02%, breaking the support at 3.00%, up 10 bps; it’s the close today that is key. We continue to remind that volatility will continue to roil markets. There is a thought circulating that inflation may be moderating and that the Fed may once again mis-read reality and back off 50 bp increases in the FF rate that had been the view two weeks ago.
By 10 am this morning the 10 yr. note still increasing, at 3.04% and convincingly breaking 3.00%.
PRICES @ 10:00 AM
10 yr note: 3.04% +12 bps
5 yr note: 3.00% +11 bps
2 Yr note: 2.70% +6 bps
30 yr bond: 3.13% +13 bps
Libor Rates: 1 mo 0.845%; 3 mo 1.406%; 6 mo 2.019%; 1 yr 2.784% (5/4/22)
30 yr FNMA 4.0: @10:00 am 99.31 -30 bp (+53 bp from 10:00 am yesterday)
30 yr FNMA 4.5: @10:00 am 101.52 -28 bp (+50 bp from 10:00 am yesterday)
30 yr GNMA 4.0: @10:00 am 100.09 -31 bp (+51 bp from 10:00 am yesterday)
Dollar/Yuan: $6.6256 +$0.0173 (China markets now open)
Dollar/Yen: 103.16 +1.08 yen
Dollar/Euro: $1.0555 -$0.0067
Dollar Index: 103.34 +0.76
Gold: $1898.60 +$29.80
Bitcoin: 39,173 -608
Crude Oil: $110.32 +$2.51
DJIA: 33,590 -471 (+932 yesterday)
NASDAQ: 12,630 -341 (+410 yesterday)
S&P 500: 4224 -76 (+125 yesterday)
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.