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Daily Market Analysis September 24, 2021

September 24th, 2021 10:30 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

One of the strongest selling binges we have seen since March yesterday. MBS prices on the 2.0 coupon down 71 bops, on the 2.5 coupon -53 bps. The 10 yr. note rate increased 11 bps. A delayed reaction to Thursday’s Fed data and what is now seen as a total collapse of China’s Evergrande property developer. Chinese government tell the country to prepare for a default; getting more and more attention. It wasn’t Evergrande that broke the interest rates yesterday.

Beside the FOMC and Powell on Wednesday the Fed released their quarterly three year forecasts. In the projections the Fed’s inflation forecast for 2021 increased to 4.2% from 3.4% in June. There wasn’t any reaction to it until yesterday. Increasing number of Fed officials are now facing up to the reality that the Fed’s strong belief that inflation is a blip that won’t last long is probably wrong. We have constantly reminded that our outlook has been inflation isn’t just short term concern, that inflation will be with us for much longer. There isn’t any end in sight in the supply chain drag the Fed was anticipating in their forecasts. No longer are markets confident that the Fed is right that inflation will be ‘transitory’, even the FOMC and Jerome Powell didn’t use that word on Wednesday.

At 9:30 am the DJIA opened a little weaker after yesterday's strong performance, -112, NASDAQ -93, S&P -16. 10 yr. at 9:30 am 1.44% +3 bps from yesterday’s 5 pm close. FNMA 2.0 30 yr. at 9:30 am -5 bps and 50 bps lower than 9:30 am yesterday. The 2.5 coupon -11 bps and 45 bps lower than 9:30 am yesterday.

At 10 am August new home sales; expected unchanged from July at 708K, as reported 740K and July revised from 708K to 729K.

Once the 10 yr. broke above 1.37%, as we noted previously, the next technical support level was 1.44%; early this morning at 12 am the 10 yield rose to 1.45%. While not in US trading hours it is significant. Yesterday at about 10 am the 10 breached 1.37% and the selling began; it fed on itself through the rest of the day. When there is a significant change in sentiment as occurred yesterday the initial reactions are usually vicious, expect today to be quiet but possibly more selling while investors go back to the drawing table to reassess the fundamental change, in this case after months of believing the Fed about inflation not lasting the change in sentiment collapsed yesterday morning.

We expect some consolidation now, the 10 is oversold in the very near term; that said, the outlook is bearish. The next upside technical target is 1.55% for the 10 yr. Already this morning MBS prices are slipping. This is a major change in sentiment usually takes time for markets to adjust.

PRICES @ 10:00 AM

10 yr. note: 1.45% +3 bp

5 yr. note: 0.95% +2 bp

2 Yr. note: 0.27% +1 bp

30 yr. bond: 1.97% +4 bp

Libor Rates: 1 mo. 0.086%; 3 mo. 0.132%; 6 mo. 0.155%; 1 yr. 0.229% (9/23/21)

30 yr. FNMA 2.0: @9:30 am 100.25 -5 bp (-50 bp from 9:30 am yesterday)

30 yr. FNMA 2.5: @9:30 am 103.00 -11 b p (-45 bp from 9:30 am yesterday)

30 yr. GNMA 2.5: @9:30 am 102.75 +2 bp (-30 b p from 9:30 am yesterday)

Dollar/Yuan: $6.4668 +$0.0078

Dollar/Yen: 110.67 +0.35 yen

Dollar/Euro: $.1716 -$0.0023

Dollar Index: 93.34 -0.12

Gold: $1,740.60 -$9.20

Bitcoin: 41,809 -2,962

Crude Oil: $73.45 +$0.15

DJIA: 34,847 +82

NASDAQ: 14,994 -58

S&P 500: 4454 +6

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 24th, 2021 10:30 AM

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