CHM Blog

The inflation outlook is getting stronger by the day and the focus now in markets is that the Fed will have to increase rates next year more than what had been expected.

This morning a quiet open after running hot last night at 9 pm ET when the 10 jumped from 1.67%, the close in US trade yesterday, to 1.70%, inching closer to our technical target at 1.74%. By 8 am this morning the note back to 1.67% and MBS prices up 13 bps at 9 am.

Consumers around the world are about to get socked with even higher prices on everyday items; increasing numbers of companies are out warning that they will (and have) increased prices to keep their profit margins. “We’re in for at least another 12 months of inflationary pressures,” Unilever CEO Alan Jope said in a Bloomberg Television interview. “We are in a once-in-two-decades inflationary environment.” While most consumer-goods makers reporting results this week expressed confidence that they’ll be able to limit the long-term hit to profitability, that means the pain passes to consumers, upping the squeeze on pockets as Christmas approaches. U.S. inflation has accelerated rapidly this year to the strongest since 2008. Across developed economies, the post-pandemic supply-demand imbalances have pushed the rate above 4% for only the second time in the past two decades. There is no debate now about inflation increases, the debate is how long will inflation pressures will last, and that is unclear. Yesterday the gauge known as the 10-year break-even rate suggested that the consumer-price index will rise by an annual average of 2.64% over the next decade, according to Federal Reserve Economic Data, or FRED. That is up from a recent low of 2.28% in late September and the highest level since 2012.

Bank of England Chief Economist Pill said that there is a potential for a rate hike in November and that inflation in the U.K. could exceed 5.0%.

At 9:30 am the DJIA opened +35, NASDAQ -53, S&P -4. 10 yr. 1.67% -3 bps. FNMA 2,5 30 yr. coupon +11 bps from yesterday but -20 bps from 9:30 am yesterday.

At 9:45 am, PMI preliminary data on manufacturing and services; the manufacturing index fell to 59.2 in October from 60.7 in September, below market forecasts of 60.3, preliminary estimates showed; the service sector index at 58.2 from 54.9 The composite, 57.3 from 55.00.

PRICES @ 10:00 AM ET

10 yr. note: 1.16% -3 bp

5 yr. note: 0.65% -5 bp

2 Yr. note: 0.35% -3 bp

30 yr. bond: 1.80% -2 bp

Libor Rates: 1 mo. 0.085%; 3 mo. 0.134%; 6 mo. 0.151%; 1 yr. 0.241% (7/19/21)

30 yr. FNMA 2.0: @9:30 am 102.08 +27 bp (+30 bp from 9:30 am ET yesterday)

30 yr. FNMA 2.5: @9:30 am 104.05 +19 bp (+25 bp from 9:30 am ET yesterday)

30 yr. GNMA 2.5: @9:30 am 103.48 -14 bp (-7 bp from 9:30 am ET yesterday)

Dollar/Yuan: $6.4835 -$0.0070

Dollar/Yen: 109.56 +0.10 yen

Dollar/Euro: $1.1770 -$0.0030

Dollar Index: 93.12 +0.23

Gold: $1824.90 +$15.70

Bitcoin: 29,544 -1,144

Crude Oil: $66.04 -$0.38

DJIA: 34,453 +462

NASDAQ: 14,322 +47

S&P 500: 4297 +39

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.