CHM Blog

More rate increases overnight, the 10 year note at 6 am ET 4.75% +6 bps, by 8 am 4.72% +3 bps. MBSs began the day down 30 bps but by 9:30 am recovered most of the early losses.

Inflation is the headline although recent data has shown some softness in inflation creep, doesn’t square with the reaction that continues to drive higher rates. Recently we noted that a growing concern is the rapid increase in US debt, based on what we hear the debt issue has gained ground with traders. The fact Congress can’t face the reality, unable to agree on reduced spending is worrying the bond market. The continual escalation of debt will increase the supply of bonds that may not find enough willing buyers unless rates continue to increase. That high grade corporate yields aren’t increasing much compared to treasuries is a sign bond trader are growing concerned Congress will continue to spend like that inebriated sailor. Funding the escalating Federal debt, according to traders, will continue to push yields higher.

The higher yields go the more losses increase, it is bringing more fears of another banking crisis like Silicon Valley Bank and Signature Bank two months ago. Soaring U.S. government bond yields sent shock waves across global markets in September. Now, yields have started October by pushing even higher, threatening to upend markets and the economy. According to recent data some long-dated Treasury securities have been trading below 50 cents on the dollar. Not sure what will happen to cool the rate increases, but unless something changes these increasing rates will show up in economic decline.

The Fed could change its tune and move the lower rates but so far, no Fed official wants that approach. Cleveland Fed President Loretta Mester said policymakers will likely need to raise rates once more this year and then hold them at higher levels for some time to get inflation back to its 2% target. Mester, who doesn’t vote on policy this year, added that the inflation rate remains too high, and the rising cost of gas resonate strongly with consumers, who could expect price pressures to start accelerating again. Atlanta Fed President Raphael Bostic: “I am not in a hurry to raise, but I am not in a hurry to reduce either,”… “If we reduce too soon, or send signals that we are not resolved, we won’t get to 2% — and we have to get to 2%. That’s non-negotiable,” he said. “So, I want us to hold. I think that’s the appropriate thing to do, for a long time.”

At 9:30 am the DJIA opened -135, NASDAQ -81, S&P -21. 10 year at 9:30 am 4.72% +3 bps. FNMA 6.0 30 year coupon -12 bps and -37 bps from 9:30 am yesterday.

At 10 am August JOLTS job openings was expected at 8.75 million, as reported 9.610 million; July revised to 8.92 million from 8.827 million.

PRICES @ 10:00 AM

10 year note: 4.74% +6 bp

5 year note: 4.76% +5 bp

2 year note: 5.13% +2 bp

30 year bond: 4.86% +7 bp

30 year FNMA 6.5: @9:30 am 99.86 -17 bps (-31 bps from 9:30 am yesterday)

30 year FNMA 6.0: @9:30 am 97.99 -12 bps (-37 bps from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 96.18 -20 bp (-41 bps from 9:30 am yesterday)

Dollar/Yuan: $7.2006 -$0.10009

Dollar/Yen: 149.90 +0.04 yen

Dollar/Euro: $1.0482 +0.0005

Dollar Index: 107.08 +0.17

Gold: $1843.00 -$4.20

Bitcoin: 27,552 -302

Crude Oil: $89.31 +$0.49

DJIA: 33,310 -123

NASDAQ: 13,228 -82

S&P 500: 4267 -22

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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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.