CHM Blog

Everything pointing to Powell signaling that rate cuts are on the way, maybe even in March. Rates began lower again this morning. Yesterday the 10 year yield declined 7 bps, the 2 year note -3 bps. Early this morning the 10 -1 bps, the 2 -1bp. Overnight the 10 year declined to 4.04% -3 bps but lost its edge as the US markets opened. IMF saying current levels for the Federal Reserve, the European Central Bank and the Bank of England will stay the same until the second half of 2024.

The IMF also saying the global economy is stronger than what it had thought a few months ago. It does not expect a hard landing as it had a few months ago. It is just as likely that the global economy would outperform expectations as it was that the economy could stumble, the IMF said. That’s a remarkable shift coming out of the COVID-19 pandemic. IMF now expects the global economy will grow at a 3.1% rate in 2024, the same as 2023, an increase of 0.2% from previous estimates. One reason for the improvement, the Fed didn’t have to push rates as high as once thought with the supply chain improvements. Global headline inflation is expected to fall from an estimated annual average of 6.8% in 2023 to 5.8% in 2024 and 4.4% in 2025.

Yesterday Treasury announced its borrowing for Q1 at $760B, less than in Q3 at $776B and less by $55B lower than forecasts. Q2 borrowing may be as high as $202B. Tomorrow treasury will release the details of how much in each term, traders will focus on how much in 2 year notes.

At 9 am November Case/Shiller home price index expected +0.4% increased just 0.1%, the 20-city year/year price thought to be up 5.8% increased 5.4%. The report is two months old, one of reasons we don’t give it much attention.

At 9:30 am the DJIA opened -25, NASDAQ -21, S&P -2. 10 year 4.04% -3 bp. FNMA 6.0 30 year coupon at 9:30 am +4 bps from yesterday’s close and +8 bp from 9:30 am yesterday.

Two key data points at 10 am; January consumer confidence from the Conference Board. The Confidence Index rose in January to 114.8, up from a revised 108.0 in December. The reading was the highest since December 2021, and marked the third straight monthly increase. The Present Situation Index—based on consumers' assessment of current business and labor market conditions—surged to 161.3 from 147.2 last month. The Expectations Index—based on consumers' short-term outlook for income, business, and labor market conditions—improved to 83.8 in January, up from a revised reading of 81.9 in December.

Also at 10 am, December JOLTS job openings thought to be at 8.70 million down from 8.79 million, openings increased to 9.026 million, November revised from 8.790 mil to 8.925 million.

Looking for another quiet day for rates ahead of FOMC tomorrow and January employment on Friday. The 10 has been in a very narrow range for the last two weeks, it is likely to break out of it tomorrow (4.17%/4.04%). The 10 am data much stronger than forecasts, the reaction sent the 10 year from 4.04% to 4.09%

PRICES @ 10:10 AM

10 year note: 4.09% +1 bp

5 year note: 4.0% +2 bp

2 year note: 4.35% +2 bp

30 year bond: 4.4.31% -1 bp

30 year FNMA 6.0: @9:30 101.24 +4 bp (+8 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 102.25 -2 bp (unch from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 100.49 +5 bp (+9 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1808 unch

Dollar/Yen: 147.17 -0.31 yen

Dollar/Euro: $1.0854 +$0.0020

Dollar Index: 103.38 -0.23

Gold: $2,064.50 +$39.10

Bitcoin: 43,394 +163

Crude Oil: $77.20 +$0.51

DJIA: 38,305 -29

NASDAQ: 15,590 -38

S&P 500: 4923 -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.