September 13th, 2021 10:09 AM by Richard Sardella MLO.100007700/NMLS 233568
This morning the 10 yr. started down 2 bps after increasing 4 bps on Friday. MBS prices began 5 bps higher. The 10 in a seven bps range from 1.37% to 1.30%. The stock market beginning to look heavy after months of very strong buying, this morning in premarket trading the indexes traded higher after declining last Friday. From what we are reading there are is a growing chorus of analysts warning investors they may be in for a bumpy ride the rest of the year.
Inflation, is it, or not? It is presently but markets following the Fed’s lead that it isn’t systemic and won’t last. Not much we can add to the present markets. August CPI data due tomorrow is set to show annual growth in U.S. consumer prices stayed above 5% in August for a third straight month, according surveys. The median forecast was 5.3%, down from 5.4% the previous month. Most other developed countries have seen a spike too -- just not nearly as big.
Much of the current wave of inflation has been driven by stretched global supply-chains. But research by the Institute of International Finance shows that while problems like longer delivery times are affecting all economies, they’re most acute in the U.S. –- and price markups by firms are bigger there too. That suggests stronger American demand is a key part of the picture. “What’s striking is just what an outlier the U.S. is, when you actually put all the countries’ supply-chain statistics next to each other,” says Robin Brooks, the IIF’s chief economist. “It’s pretty clear to me that the fiscal side is what makes the U.S. stand out.”
So, are investors really worrying about a longer inflation spiral; no. Even if prices do climb a bit faster as a result, there’s no reason to fear a 1970s-style spiral -- because labor isn’t strong enough now to keep pushing wages higher like it did back then -- and monetary policy can easily rein inflation in. Economists are thinking Biden’s economic plan would be less inflationary than the $1.9 trillion stimulus approved in March, because it invests in building the economy’s capacity. All that said; inflation worries still there, but not serious enough to keep interest rates from increasing. The idea that interest rates have a chance of declining though is difficult to square.
At 9:30 am ET the DJIA opened +249 after declining 272 last Friday; NASDAQ +90, down 133 Friday; S&P +32, down 35 Friday. The 10 yr. note 1.32% -2 bp. FNMA 2.0 30 yr. coupon at 9:30 am +5 bp and unchanged from 9:30 am Friday; the 2.5 coupon +6 bps and +2 bp from 9:30 am Friday.
The only data today, the August treasury budget, expected a deficit of -$303.5B. Markets already know 2021 budget deficit will be about $3 trillion, Sept is the last month of the fiscal year.
House Democrats detailed their proposed tax increases, calling for raising the corporate tax rate to 26.5% from 21%, a 3-percentage-point surtax on top earners and a capital-gains tax increase. A vote on the bill is scheduled this week in the Ways and Means Committee. 10 yr. so far this morning
PRICES @ 10:00 AM ET
10 yr. note: 1.32% -2 bp
5 yr. note: 0.80% -1 bp
2 Yr. note: 0.22% unch
30 yr. bond: 1.92% -2 bp
Libor Rates: 1 mo. 0.083%; 3 mo. 0.115%; 6 mo. 0.149%; 1 yr. 0.222% (9/10/21)
30 yr. FNMA 2.0: @9:30 am 101.33 +5 bp (unch from 9:30 am Friday)
30 yr. FNMA 2.5: @9:30 am 103.97 +6 bp (+2 bp from 9:30 am Friday)
30 yr. GNMA 2.5: @9:30 am 103.27 +5 bp (+2 bp from 9:30 am Friday)
Dollar/Yuan: $6.4538 +$0.0095
Dollar/Yen: 109.97 +0.06 yen
Dollar/Euro: $1.1801 -$0.0012
Dollar Index: 92.70 +0.12
Gold: $1792.60 +$0.50
Bitcoin: 46,256 +1233
Crude Oil: $70.71 +$0.99
DJIA: 34,840 +232
NASDAQ: 15,083 +32
S&P 500: 4470 +11
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.