CHM Blog

The takeaway from yesterday’s Powell press conference and the FOMC is the Fed is likely finished increasing rates. The 10 year note declined 20 bps, MBS prices increased 65 bps. This morning rates are declining further after the note broke a psychological level at 4.75%, at 9 am ET the note yield -8 more bps to 4.65% and MBS prices began 38 bps better than yesterday.

Weekly jobless claims thought to +213K increased 217K +5K from last week, the highest level in seven weeks, continuing claims increased 35K to 1.82 million.

Q3 preliminary productivity and unit labor costs at 8:30 am, productivity increased 4.7% with forecasts at 4.2% and higher than Q2 at 3.5%. Unit labor costs expected +0.7% fell 0.8% (productivity higher usually lowers costs). Q2 labor costs +3.2%, revised from +2.2%.

Beside the potential of no more rate increases, Treasury recently announced it would not need to borrow as much as had been expected, due to higher receipts. Expectations for more debt issuance is one the reasons the long end of the curve increased recently. Next week 3 year, 10 year and 30 year treasuries will come to auction totaling $112B, less than was expected a week ago.

At 9:30 am the DJIA opened +217, NASDAQ +159, S&P +42. 10 year note at 9:30 am 4.64% -9 bps. FNMA 6.5 30 year coupon at 9:30 am +39 bps from yesterday’s close and +82 bps from 9:30 am yesterday.

The Bank of England left its key interest rate unchanged for the second straight meeting but said they don’t expect to ease policy soon. The Bank followed both the Federal Reserve and the European Central Bank in leaving its key rate unchanged. That means all three decided against an increase in borrowing costs for the first time since December 2021, when the BOE became the first to start raising its key rate. “Higher interest rates are working and inflation is falling,” BOE Governor Andrew Bailey said. “But we need to see inflation continuing to fall. It’s much too early to be thinking about rate cuts.” Consumer prices rose by 6.7% in the 12 months through September, much stronger than ECB and US.

September factory orders increased 2.8% with estimates at 2.5%.

A swift move lower yesterday and so far this morning. Not likely there will more through the day with October employment data tomorrow morning. The unemployment rate unchanged at 3.8%, non-farm jobs +183K, private jobs +143K, month/month average hourly earning +0.3% from +0.2% in Sept, year/year +4.0% from 4.2% in Sept.

PRICES @ 10:00 AM

10 year note: 4.66% -7 bp

5 year note: 4.60% -7 bp

2 year note: 4.94% -2 bp

30 year bond: 4.84% -8 bp

30 year FNMA 7.0: @9:30 am 101.81 +43 bp (+65 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 100.49 +39 bp (+82 bp from 9:30 am yesterday)

30 year FNMA 6.0: @9:30 am 98.63 +41 b p (+86 bp from 9:30 am yesterday)

30 year GNMA 6.0: @9:30 am 99.33 +36 bp (+110 bp from 9:30 am yesterday)

Dollar/Yuan: $7.3163 -$0.0007

Dollar/Yen: 150.30 -0.65 yen

Dollar/Euro: $1.0646 +$0.0076

Dollar Index: 105.90 -0.99

Gold: $1992.60 +$5.10

Bitcoin: 34,943 -314

Crude Oil: $81.12 +$0.68

DJIA: 33,544 +270

NASDAQ: 13,222 +160

S&P 500: 4285 +47

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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