November 10th, 2021 9:20 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday the 10 yr. note yield dropped 5 bps, MBS prices +16 bps. This morning at 8:30 am two key economic releases increased the 10 yr. 4 bps to 1.49% and MBS prices -27 bps at 8:35 am.
Inflation increased more than the estimates that were already higher than in Sept. October CPI expected +0.5% increased 0.9% and over twice as high than in Sept (+0.4%), yr./yr. CPI expected 5.8% increased 6.2% (Sept 5.4%). Ex food and energy expected +0.4% increased 0.6% (Sept +0.2%), yr./yr. expected +43% increased 4.6% (Sept 4.0%). The annual increase, the most since 1990. Against a backdrop of solid demand, businesses have been steadily raising prices for consumer goods and services at the same time supply chain bottlenecks and a shortage of qualified workers drive up costs. Prices increasing across the board, energy, shelter, food and service. The increases in prices weren’t supposed to last this long and were completely blamed on supply chain slowing, the Fed stood strong that the recent pop in inflation was “transitory”; as data continues to unfold its obvious inflation is increasingly being embedded in all prices. The Fed now saying inflation will last through all of 2022.
Inflation increases are not just in the US, its universal. In China, inflation at the factory level last month increased by the most in 26 years; excluding the volatile food and energy components, so-called core inflation rose 0.6% from the prior month and 4.2% from a year earlier. The annual increase was the largest since 1991.Consumer prices in Brazil sped up by more than forecast.
Another report at 8:30 am, weekly jobless claims, were as expected, claims increased 267K, -4K from the prior week.
At 9:30 am the DJIA opened -43, NASDAQ -138, S&P -17. 10 yr. note 1.48% +3 bp. FNMA 2.5 30 yr. coupon -30 bps and -50 bps from 9:30 am yesterday.
Back in the day one indicator of inflation expectations could be seen in the price of gold; not so much recently though, gold has been driven by the change in the value of the dollar and hasn’t reacted to inflation. That may be changing; gold recently has been on a buying spree. Over the last five days gold has increased $75.00/oz. Six months ago we were looking for gold to increase to $4,000/oz over the next four years; it didn’t move and actually declined. Still hold our very long forecast but as we noted then, it wouldn’t be an investment that lends to leveraged trading, has to be buying physical gold as part of a balanced portfolio. The high this year in January $1950, the low in March $1700, now $1860.
The bond market will be closed tomorrow for Veteran’s Day, some trading today will take that into account.
PRICES @ 10:00 AM ET
10 yr. note: 1.50% +5 bp
5 yr. note: 1.17% +8 bp
2 Yr. note: 0.50% +6 bp
30 yr. bond: 1.85% +2 bp
Libor Rates: 1 mo. 0.089%; 3 mo. 0.149%; 6 mo. 0.215%; 1 yr. 0.349% (11/9/21)
30 yr. FNMA 3.0: @9:30 104.31 -12 bp (-25 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 102.75 -30 bp (-50 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 102.45 -30 bp (-8 bp from 9:30 yesterday)
Dollar/Yuan: $6.3852 -%0.0076
Dollar/Yen: 113.56 +0.68 yen
Dollar/Euro: $1.1562 -$0.0034
Dollar Index: 94.16 +0.20
Gold: $1868.50 +$37.70
Bitcoin: 68,346 +1,216
Crude Oil: $83.86 -$0.29
DJIA: 36,321 +2
NASDAQ: 15,830 -56
S&P 500: 4680 -5
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 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.