CHM Blog

Daily Market Analysis September 13, 2022

September 13th, 2022 11:15 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

Not good news: inflation ticked higher in August. CPI expected -0.1% from 0.0% in July increased 0.1% m/m; yr./yr. expected +8.1% from 8.5% in July increased 8.3%. Core CPI expected +0.3% m/m jumped 0.6%, yr./yr. expected +6.1% from 5.9% in July increased 6.3%. This not expected, inflation had slipped each of the last three months from the prior month. The price of gas has declined, food prices though continued to increase; shelter, food and medical care were among the largest contributors to price growth. Price pressures are still historically elevated and widespread, pointing to a long road ahead toward the Fed’s inflation target. If there were anyone out there still hoping the Fed would only increase the FF rate by 50 bps, this data cements a 75 bp increase next week.

Food costs increased 11.4% from a year ago, the most since 1979. Electricity prices rose 15.8% from 2021, the most since 1981. Gasoline prices, meanwhile, fell 10.6% in August, the biggest monthly drop in more than two years. Shelter costs -- which are the biggest services’ component and make up about a third of the overall CPI index -- continue to rise. Overall shelter costs increased 0.7% from July and 6.2% from a year ago, both the most since the early 1990s. Excluding food and energy, the cost of goods was up 0.5% from a month ago while services costs less energy climbed 0.6%. Used car prices fell for a second month. Airfares also dropped, likely due to the decline in fuel prices. Nonprescription drugs rose the most on record on an annual basis. Overall medical-care goods posted the largest advance since 2017. As far as health services, health insurance surged a record 24.3% year-over-year.

Prior to the CPI this morning the DJIA was up 120 points in the futures markets. At 9:30 am the DJIA opened -540, NASDAQ -354, S&P -87. 10 yr. note at 9:30 am 3.44% +8 bp. FNMA 5.0 30 yr. coupon at 9:30 am -67 bps and -105 bps from 9:30 am yesterday.

Last June 14th the 10 yr. note had run up to 3.47% then spent six weeks declining to 2.67% on August 8th; since then, it has been up, up and away. This morning at 9:30 am the 10 is testing that high in June , at 3.44%. Between June and July, the tone was inflation was dropping and the Fed would go easy on rate increases. Inflation was cooling and investors and traders were reticent about increasing FF rates. Jerome Powell and other Fed officials began to up the rhetoric in August as energy prices flared with the Ukraine war, since then interest rates have been straight up and MBS prices have crumbled.

The last two sessions saw the dollar decline, after the report this morning the dollar back to dominating other key currencies.

At 1 pm Treasury will auction $18B of 30s.

The initial reaction to CPI may be a little overdone and MBS prices and the 10 yr. may back off the reaction.

PRICES @ 10:00 AM

10 yr note: 3.44% +8 bp

5 yr note: 3.58% +12 bp

2 Yr note: 3.74% +11 bp

30 yr bond: 3.56% +5 bp

Libor Rates: 1 mo 2.783%; 3 mo 3.270%; 6 mo 3.806%; 1 yr 4.245% (9/12/22)

30 yr FNMA 5.0: @9:30 am 99.73 -67 bp (-105 bp from 9:30 am yesterday)

30 yr FNMA 4.5: @9:30 am 98.08 -67 bp (-103 bp from 9:30 am yesterday)

30 yr GNMA 4.5: @9:30 am 98.84 (-94 bp from 9:30 am yesterday)

Dollar/Yuan: $6.9254 -$0.0011

Dollar/Yen: 143.88 +1.04 yen

Dollar/Euro: $1.0042 -$0.0080

Dollar Index: 109.33 +1.00

Gold: $1716.30 -$24.30

Bitcoin: 21,331 -1065

Crude Oil: $88.10 +$0.32

DJIA: 31,663 -717

NASDAQ: 11,858 -409

S&P 500: 4004 -106

About Richard Sardella

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.

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 September 13th, 2022 11:15 AM

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