CHM Blog

Daily Market Analysis October 5, 2021

October 5th, 2021 8:54 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

10 yr. note started up 2 bps at 1.50% this morning, MBSs at 8:30 am ET -11 bps from yesterday’s close.; stock indexes in pre-open trade, the DJIA +175, NASDAQ +55.

The US debt ceiling has to be increased or it will set off a recession warned Janet Yellen yesterday; probably exaggerated a little to drive home the point politicians are playing with fire. As a response Senate Majority Leader Chuck Schumer set up a vote by tomorrow on increasing the federal government’s borrowing ceiling, but didn’t lay out how Democrats planned to pass a bill without Republican votes. “Let me be clear about the task ahead of us: we must get a bill to the president’s desk dealing with the debt limit by the end of the week. Period,” Republicans have made it clear that they would block the bill during a vote likely to occur on Wednesday. Sixty votes are needed to clear a procedural hurdle, and the Senate is divided 50-50 between Republicans and Democrats.

Inflation continues to draw the most attention in the interest rate markets; since the FOMC meeting on the 23rd of September inflation concerns have increased. Until recently the Fed believed any increase in the inflation level would be temporary (transitory), now that idea is being questioned even by the Fed itself. Every quarter the Fed releases its projections on employment, inflation and the FF rate. A year ago, long before the supply bottlenecks emerged, the median forecast by Fed officials was for core inflation (which excludes food and energy) in 2022 of 1.8%. Every quarter since then they have nudged that up, and in the forecasts released on the 23rd of Sept they see core inflation next year at 2.3%.

Unless you expect the stock market to totally collapse or the economy to fall into deep recession it is difficult to paint a picture for rates to decline in any appreciable way. Initially inflation was blamed on temporary supply chain disruptions, recently though the concerns have morphed to become wider. The Fed has “promised’ that it would begin to cut buying treasuries and MBSs each month, that has led traders and markets to assume the Fed will increase rates sooner than what had been anticipated.

At 9:30 am the DJIA opened +136 after falling 324 yesterday, NASDAQ +60 from -311 yesterday. 10 yr. 1.50% +2 bps. FNMA 2.5 30 yr. coupon at 9:30 am -8 bps and -11 bps from 9:30 am yesterday.

At 10 am the Sept non-manufacturing index, expected at 60.0 from 61.7, as reported the index increased to 61.9.

Over the last week the 10 yr. note and MBSs have been consolidating the recent increase that took many by surprise (10 yr. increased 25 bps in five sessions). The potential range for the 10 continues between 1.55% and 1.44%. The range won’t be broken until at least Friday when Sept employment data is reported; tomorrow ADP will report its private jobs, expected at 428K up from 374K in August. ADP and BLS data have strong histories of wide differences in private job numbers; current BLS estimates for private jobs in Sept 445K.

PRICES @ 10 AM ET

10 yr. note: 1.52% +4 bp

5 yr. note: 0.98% +3 bp

2 Yr. note: 0.28% +1 bp

30 yr. bond: 2.09% +4 bp

Libor Rates: 1 mo. 0.077%; 3 mo. 0.126%; 6 mo. 0.155%; 1 yr. 0.232% (10/4/21)

30 yr. FNMA 3.0: @9:30 am 104.64 -3 bp (-8 bp from 9:30 am yesterday)

30 yr. FNMA 2.5: @9:30 am 103.23 -8 bp (-11 bp from 9:30 am yesterday)

30 yr. GNMA 2.5: @9:30 am 102.80 -14 bp (-22 bp from 9:30 am yesterday)

Dollar/Yuan: $6.4467 (China closed)

Dollar/Yen: 111.34 +0.42 yen

Dollar/Euro: $1.1591 -$0.0028

Dollar Index: 94.01 +0.24

Gold: $1755.80 -$11.80

Bitcoin: 50,140 +1,124

Crude Oil: $78.72 +$1.09

DJIA: 34,229 +225

NASDAQ: 14,396 +141

S&P 500: 4335.+35

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on October 5th, 2021 8:54 AM

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