November 12th, 2021 9:01 AM by Richard Sardella MLO.100007700/NMLS 233568
After one of the biggest moves in the interest rate sector in many months on Wednesday, and a day off, this morning the 10 yr began unchanged frm Wednesday and MBS prices also unchanged. In pre-opening trade the stock indexes traded better in the futures market.
The shocking increase in consumer prices on Wednesday, substantially higher than even the most inflation hawks were expecting, +6.2%, the strongest in 31 years, drove the leveraged bullish biased positions into the ground. The biggest increases on Wednesday were at the short and middle of the yield curve. Of all of the issues that influence interest rates inflation concerns lead the parade. It has taken two months of debate whether to believe the Fed or believe the data, Wednesday’s CPI finally couldn’t be ignored. The highly leveraged interest rate markets betting that the Fed is right was blown up triggering mass selling of US treasuries, the Fed has lost its influence on inflation forecasts.
There is a theory floating around that inflation is increasing because consumers increasingly are expecting it, not the usual inflation outlooks that set interest rates. Those still hanging on to the forecast that inflation won’t last turning over all rocks to justify the reason inflation is increasing; not the supply change or chip shortages, it’s the consumer expectations that is increasing prices. In other words, just ignore consumer expectations and everything will be resolved. Central banks doing a Quixote analysis; that inflation about excess demand, and not just supply bottlenecks? Some on Wall Street think so, since production of many key products is now above 2019 levels. Yesterday the Bank for International Settlements said, there is no clear answer to how high demand is overall: It is running ahead of supply because consumption remains abnormally geared toward goods rather than services. The idea of blaming consumer expectations is grabbing at straws, central banks may base their final call on a familiar boogeyman: inflation expectations.
At 9:30 am the DJIA opened -148, NASDAQ +48, S&P +11. 10 yr 1.55% unchanged. FNMA 2.5 30 yr coupon at 9:30 am +8 bps but 34 bps lower than 9:30 am Wednesday.
Pres. Biden scheduled to sign the $1 trillion infrastructure bill next Monday. The other huge social spending bill still doesn’t have necessary votes to pass it.
At 10 am the U. of Michigan consumer sentiment index for mid-month, expected at 72.3 frm 71.7 in October, as reported it collapsed to 66.8.
Also at 10 am Sept JOLTS job opening expected at 10.10 mil frm 10.44 mil in August, as released 10.43 mil.
PRICES @ 10:00 AM
10 yr note: 1.56% +1 bp
5 yr note: 1.24% +2 bp
2 Yr note: 0.52% +1 bp
30 yr bond: 1.92% unch
Libor Rates: 1 mo 0.089%; 3 mo 0.156%; 6 mo 0.227%; 1 yr 0.387% (11/11/21)
30 yr FNMA 3.0: 104.09 +8 bp (-24 bp frm 9:30 am Wednesday)
30 yr FNMA 2.5: 102.41 +8 bp (-34 bp frm 9:30 am Wednesday)
30 yr GNMA 2.5: 102.13 -2 bp (-40 bp frm 9:30 am Wednesday)
Dollar/Yuan: $6.3813 -$0.0093
Dollar/Yen: 113.99 -0.08 yen
Dollar/Euro: $1.1437 -$0.0012
Dollar Index: 95.23 +0.06
Gold: $1859.50 -$4.50
Bitcoin: 63,598 -1.431
Crude Oil: $80.79 -$0.80
DJIA: 35,991 +70
NASDAQ: 15,743 +39
S&P 500: 4655 +6
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.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.