CHM Blog

Yesterday and Friday the 10 year note increased 25 bps after the FOMC last Thursday and Jan employment data on Friday. FOMC and Powell at his press conference tossed water on what was a growing belief within markets that the Fed would stop increasing rates after the March (13 and 14) FOMC meeting. Friday’s job increase (517K) really shook the tree, since then traders have swung around and now 71% chance another increase at the May meeting is being digested. Will Powell change his tune and soften the current outlook? That isn’t likely, he must stay on message to assure no waffling that some in markets continue to hold onto.

While it isn’t a key data point, this morning the Dec wholesale deficit was released, expected -$68.8B, as released $67.4B. U.S. imports rose as demand for consumer goods and autos picked up, partially offsetting a weakening in global trade late last year and widening the U.S. trade deficit by 10.5%. Imports rose 1.3% in December from November and exports decreased 0.9% during the same period. Later the afternoon Dec consumer credit will be released, expected at $25.0B.

At 1 pm Treasury will begin refunding with $40B of 3 year note. Tomorrow we’ll get to the meat with $35B of new 10 year notes auctioned (Thursday $21B of 30s).

This evening the State of the Union address to Congress.

At 9:30 am this morning the DJIA opened -179, NASDAQ +3, S&P -8. 10 year note at 9:30 am 3.66% +2 bps. FNMA 5.5 30 year coupon at 9:30 am -2 bps from yesterday’s close and +2 bps from 9:30 am yesterday, (yesterday’s selling began about 10 am yesterday)

Federal Reserve Bank of Minneapolis President Neel Kashkari said January’s strong labor-market report shows the US central bank needs to keep raising interest rates. “Right now I’m still at around 5.4%,” Kashkari told CNBC in an interview this morning, referring to his forecast for how high rates need to go to bridle inflation. “If I had to pick a number today, I’d be where I was in December.” “No one should overreact to one report,” Kashkari said. “But the underlying strength of the services sector of the economy is still very robust and that’s where I think a lot of us are focusing our attention.” “I too was surprised by the big jobs number. It tells me that so far we’re not seeing much of an imprint of our tightening to date on the labor market,” he said. “There’s some evidence it’s having some effect but it’s pretty muted so far. I haven’t seen anything yet to lower my rate path.” “We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy,” he said. “ We can always back off so we’re having to let inflation guide policy rather than our models guide policy.”

The dollar decline has found support, the dollar index is the highest since January 9th, turned on new belief the Fed has more increases ahead than what markets expected.

Not expecting much change until at least early this afternoon when Chair Powell will be speaking.

The decline in weekly jobless claims, the FOMC comments and the very strong job growth on Friday combine to remove the idea that the Fed would stop rate increases at the May FOMC meeting. Between now and the May meeting, three employment reports, nine inflation reads.

PRICES @ 10:00 AM

10 yr note: 3.65% unch

5 yr note: 3.82% -2 bp

2 Yr note: 4.45% -3 bp

30 yr bond: 3.68% unch

Libor Rates: 1 mo 4.588%; 3 mo 4.843%; 6 mo 5.139%; 1 yr 5.404% (2/6/23)

30 yr FNMA 6.0: @9:30 am 102.19 +3 bp (+14 bp from 9:30 am yesterday)

30 yr FNMA 5.5: @9:30 am 100.83 -2 bp (+2 bp from 9:30 am yesterday)

30 yr GNMA 5.5: @9:30 am 101.14 unch (+8 bp from 9:30 am yesterday)

Dollar/Yuan: $6.7887 -$0.0062

Dollar/Yen: 132.00 -0.64 yen

Dollar/Euro: $1.0682 -$0.0034

Dollar Index: 103.80 +0.18

Gold: $1882.90 +3.30

Bitcoin: 22,986 +66

Crude Oil: $75.06 +$0.95

DJIA: 33,795 -96

NASDAQ: 11,867 -24

S&P 500: 4100 -10

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.