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Daily Market Analysis September 23, 2021

September 23rd, 2021 8:53 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

Huge selling in the interest rate markets this morning after little reaction yesterday over the FOMC and Powell; at 8:30 am this morning the 10 yr. note traded at 1.35% +4 bps from yesterday’s 1 bp decline. MBS prices at 8:30 am -31 bps from yesterday. Stock indexes back to levels prior to the panic selling on Monday.

Yesterday the FOMC and Powell, tapering and a glow of economic confidence. Inflation forecasts released yesterday in the Fed’s forecast revised from +3.4% in June to +4.2%. The Fed’s inflation forecasts are not matching reality, for months Powell has continued to define the inflation outlook as transitory, interesting that in the policy statement was no longer used and in his press conference Powell also refrained using the word. Investors and money managers no longer biting on the transitory as defined by the Fed (a few months). This is not the beginning of a long run in inflation, but it is the realization that the Fed has miscalculated the impact of the supply chain’s effect on prices of many products, and those not directly affected also running prices higher. Yes, Powell did confirm the Fed will begin tapering but that wasn’t new news, markets were already expecting it; of course Powell and the FOMC left details hanging (when, how much each month and when it will end).

Interest rates higher today likely due to Chinese government officials reluctant to bail out Evergrande. Evergrande is a 25-year-old developer based in the southern metropolis of Shenzhen. It has about 800 projects in progress spread across more than 200 cities—in every province of mainland China, according to its most recent annual report. Its deepening financial troubles have rattled investors, employees, suppliers and home buyers, and begun to spill over into other parts of the Chinese economy.

At 8:30 am weekly jobless claims for last week was expected at 309K, as reported 351K; the prior week revised a little higher to 335K making the weekly gain +16K. Claims had been slowly declining until the week before and now last week.

At 9:30 am the DJIA opened +226, NASDAQ +61, SA&P +21. 10 yr. at 9:30 am 1.36% +5 bps. FNMA 2.0 30 yr. coupon at 9:30 am -25 bps and -31 bps from 9:30 am yesterday; the 2.5 coupon -19 bps and -25 bps from 9:30 am yesterday. The opening prices completely reverses the Monday selling. Volatility is high, also volatility in the rate markets, yesterday’s low for the 10 yr. 1.30%, this morning 1.37%.

At 9:45 am Sept PMI composite index expected at 55.5 was 54.5, manufacturing index expected 60.8 was 60.5, services expected 55.1 as reported 54.4; it is a preliminary Sept report and has little effect on markets until the final data in a couple of weeks.

At 10 am August leading economic indicators, expected +0.6%, as reported +0.9%.

The 10 yr. at its high rate going back to mid-August and at the top of its week’s long trading range. The burst higher today turned our technical work from neutral to bearish. If 1.37% does hold the comfortable range we would not discount that the rate could inch back to 1.30%, the bottom of its range. If the range doesn’t hold the next upside target is 1.44%.

PRICES @ 10 AM ET

10 yr. note: 1.36% +5 bp

5 yr. note: 0.90% +5 bp

2 Yr. note: 0.25% unch

30 yr. bond: 1.87% +5 bp

Libor Rates: 1 mo. 0.083%; 3 mo. 0.129%; 6 mo. 0.155%; 1 yr. 0.225% (9/22/21)

30 yr. FNMA 2.0: @9:30 am 100.75 -25 bp (-31 bp from 9:30 am yesterday)

30 yr. FNMA 2.5: @9:30 am 103.45 -19 bp (-25 bp from 9:30 am yesterday)

30 yr. GNMA 2.5: @9:30 am 103.05 -14 b p (-17 bp from 9:30 am yesterday)

Dollar/Yuan: $6.4549 -$0.0074

Dollar/Yen: 110.10 +0.29 yen

Dollar/Euro: $1.1740 +$0.0051

Dollar Index: 93.06 -0.41

Gold: $1751.540 -$27.40

Bitcoin: 44,057 +597

Crude Oil: $72.68 +$0.45

DJIA: 34,470 +412

NASDAQ: 15,025 +128

S&P 500: 4443 +48

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 September 23rd, 2021 8:53 AM

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