CHM Blog

The 10 year note at 7 am ET 3.99% -4 bps, MBS trading began +15 bps at 8 am. The decline prior to the key inflation data at 8:30 am implied traders were expecting inflation to have slowed and more confidence in the outlook of Fed rate cuts. In the mid-east Houthis boarded a tanker in the red Sea and turned it toward Iran. If the US increases its involvement in the mid-east conflicts’ investors will head for safety in US treasuries.

At 8:30 am CPI month/month expected +02.% increased to +0.3%, year/year CPI thought to be +3.2% increased to +3.4% and up from 3.1% from November. Core CPI forecasts expected month/month to increase 0.2% reported +0.3% but unchanged from November; year/year core +3.9% against 3.8% expected and down from 4.0% in November.

Also at 8:30 am, weekly jobless claims thought to be 209K reported at 202K, the prior week revised from 202K to 203K making the week’s change -1K. claims the lowest since October. Continuing claims at 1.334 million down 34K from the prior week (continuing claims are from two weeks ago, December 30th).

The two data points took the 10 year note from 3.99% -4bps, prior to the data up to 4.06% +3 bps from yesterday’s close. Inflation higher than what was expected, and the most in three months took the wind out of the idea the Fed is about ready to lower rates. Based on the report the take away is the Fed won’t be in a hurry to lower rates as had been widely thought. Inflation is declining but today’s data puts a cloud over when the Fed will cut. Shelter cost increases was the driver for less decline than was expected.

At 9:30 am the DJIA opened +104, NASDAQ +61, S&P +13. 10 year at 9:30 am 4.02% -1 bp. FNMA 6.0 30 year coupon at 9:30 am +7 bps from yesterday’s close and -10 bps from 9:30 am yesterday.

This afternoon at 1 pm Treasury will auction $21B of 30 year bonds, yesterday’s 10 year auction was soft with demand lower.

Volatility in the markets today, the 10 at 3.99% early this morning, at 10 am the 10 at 4.01% -2 bps. The remainder of the day there isn’t any scheduled news or data which should quiet the volatility. Tomorrow another inflation reading, inflation on wholesale prices, PPI. Iran seized a tanker in the Gulf of Oman, adding to tensions.

The 10 year note is capped at 4.04%, one week the note has backed away when the yield hits that resistance. The 10 year note has failed to break back above its 200 day average since mid-December but the note has been above its 20 day average that implies weakness in the near term. The stock market opened 30 minutes ago, the DJIA +104 on the open, at 10 am -71 and headed lower.

PRICES @ 10:00 AM

10 year note: 4.04% unch

5 year note: 3.97% unch

2 year note: 4.34% -2 bp

30 year bond: 4.23% +2 bp

30 year FNMA 6.0: @9:30 am 101.23 +7 bp (-10 bps from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 102.19 -7 bp (+1 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 100.37 +3 bp (-19 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1621 -$0.0094

Dollar/Yen: 145.84 +0.09 yen

Dollar/Euro: $1.0953 -$0.0032

Dollar Index: 102.54 +0.17

Gold: $2,032.20 +$4.30

Bitcoin: 48,565 +2,629 (SEC approved ETF trading)

Crude Oil: $72.91 +$1.53

DJIA: 37,624 -71

NASDAQ: 14,975 +6

S&P 500: 4778 -5

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.