CHM Blog

Yesterday January CPI was hotter than forecasts sending rates higher and stock indexes lower. This morning no follow through, 10 year note yield began down 1 bps at 8 am ET, by 9 am back to unchanged; stock indexes yesterday dropped, the DJIA -525, this morning the index traded slightly better in pre-open trading.

Inflation declining but not in the straight line that some were believing. The Fed led by Powell has made it clear than cutting rates would depend on continued declines in inflation, markets were convinced the Fed would cut rates at the March FOMC meeting, last week some trepidation that pushed the first rate cut to the May meeting, now its July for the moment. The spike in rates yesterday and decline in equity markets, a knee jerk reaction, the potential of more selling looms as long as the economic outlook and employment remain strong, but that view is very speculative and uncertain. Overnight inflation in the UK declined, -0.6% with forecasts of -0.3%, year/year though unchanged at 4.0%. The ECB policymakers said that the central bank will depend on data when it comes to timing the initial rate cut.

Comments from some on yesterday’s stock market retreat suggest it was an overreaction and stocks are still a buy. To break the bullish trend, it will take more than yesterday’s slight increase in inflation. There aren’t indications equities are over done when you see it that margin debt at the NYSE still at low levels, not everyone totally committed based on that metric. Current sentiment still cautious, some believe as long as that continues indexes will improve.

The only news today, weekly MBA mortgage applications last week. Purchase apps -2.5%, re-finance apps -2.1%.

National Association of Realtors Chief Economist Lawrence Yun said while apartment rents are declining and rent growth is at low single digit increases. Shelter costs in January were 6% higher than one year prior—a slower pace than their peak at 8.2% in March 2023, but still faster than its historic average of 4.2%.

At 9:30 am the DJIA opened +121, NASDAQ +127, S&P +29. 10 year note at 9:30 am 4.30% -2 bps. FNMA 6.0 30 year coupon at 9:30 am +5 bps from yesterday’s close and -26 bp from 9:30 am yesterday; yesterday afternoon most lenders re-priced lower from initial pricing.

Nothing left on the calendar today, tomorrow several key reports. January retail sales, weekly jobless claims, January import and export prices, January industrial production and factory use, February NAHB housing market index. Friday wholesale prices with January PPI and the University of Michigan consumer sentiment index. A lot to plow through that should keep rates in narrow trading today.

PRICES @ 10:00 AM

10 year note: 4.29% -3 bp

5 year note: 4.28% -5 bp

2 year note: 4.61% -5 bp

30 year bond: 4.47% unch

30 year FNMA 6.0: @9:30 am 100.19 +5 bp (-26 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 101.51 +1 bp (-22 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 99.11 +8 bp (-20 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1791 -$0.0109

Dollar/Yen: 150.60 -0.19 yen

Dollar/Euro: $1.0719 +$0.0011

Dollar Index: 104.80 -0.16

Gold: $2,004.30 -$3,20

Bitcoin: 51,850 +2,426

Crude Oil: $78.65 +$0.77

DJIA: 38,332 +59

NASDAQ: 15,777 +122

S&P 500: 4982 +29

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.

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.