CHM Blog

ADP reported private jobs in May increased 278K with estimates at +160K. Weekly jobless claims expected 235K, about in line at 232K. The 4 week average 229.50 from 232K the prior week. Q1 productivity expected -2.7% improved to -2.1%; unit labor costs thought to be +6.3% increased 4.2%

Yesterday Fed governor Philip Jefferson added his view that the Fed would pause rate increases at the June FOMC meeting in two weeks. After Jefferson spoke, investor bets for a hike at the June 13-14 Federal Open Market Committee plunged to about 35% Wednesday from nearly 60% a day earlier. “Skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming,” Philadelphia Fed President Patrick Harker, who also urged a June pause while stressing that officials could instead shift to moving at every other meeting if they need to keep tightening.

The House passed the bill that suspends the debt ceiling until January 2025. The vote count, 314 to 117. Both Democrats and Republicans supported the bill, known as the Fiscal Responsibility Act. The agreement trims some discretionary spending next fiscal year and imposes a 1% spending cap for fiscal 2025 but doesn’t touch big parts of the budget including Social Security and Medicare. It also has provisions to speed up energy projects and impose new requirements for food assistance. The bill will reduce government deficits by about $1.5 trillion over a decade compared with the baseline forecast, according to the Congressional Budget Office. Republicans complained the bill were less than the bill they proposed in April; Democrats didn’t like the provisions related to energy permitting and work requirements for social programs.

At 9:30 am the DJIA opened -133, NASDAQ unchanged, S&P +2. 10 year 3.60% -5 bp. FNMA 6.0 30 year coupon at 9:30 am +19 bps and +41 bps from 9:30 am yesterday.

At 10 am May ISM manufacturing index was expected at 47.0 from 47.1 in April. “The May Manufacturing PMI® registered 46.9 percent, 0.2 percentage point lower than the 47.1 percent recorded in April. Regarding the overall economy, this figure indicates a sixth month of contraction after a 30-month period of expansion. The New Orders Index remained in contraction territory at 42.6 percent, 3.1 percentage points lower than the figure of 45.7 percent recorded in April. The Production Index reading of 51.1 percent is a 2.2-percentage point increase compared to April’s figure of 48.9 percent. The Prices Index registered 44.2 percent, down 9 percentage points compared to the April figure of 53.2 percent. The Backlog of Orders Index registered 37.5 percent, 5.6 percentage points lower than the April reading of 43.1 percent. The Employment Index indicated another month of expansion, registering 51.4 percent, up 1.2 percentage points from April’s reading of 50.2 percent. The Supplier Deliveries Index figure of 43.5 percent is 1.1 percentage points lower than the 44.6 percent recorded in April; this is the index’s lowest reading since March 2009 (43.2 percent). The Inventories Index dropped 0.5 percentage point to 45.8 percent; the April reading was 46.3 percent. The New Export Orders Index reading of 50 percent is 0.2 percentage point higher than April’s figure of 49.8 percent. The Imports Index remained in contraction territory, registering 47.3 percent, 2.6 percentage points lower the 49.9 percent reported in April.”

Tomorrow the May employment data: this morning ADP private jobs were thought to be +160K, as reported 278K.

PRICES @ 10:00 AM

10 year note: 3.59% -6 bp

5 year note: 3.71% -6 bp

2 year note: 4.37% -4 bp

30 year bond: 3.82% -4 bp

Libor Rates: 1 month 5.193%; 3 month 5.517%; 6 month 5.646%; 1 year 5.716% (5/31/23)

30 year FNMA 6.0: @9:30 am 101.33 +19 bp (+41 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 100.06 +20 bp (+39 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 100.03 +20 bp (+44 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1048 -$0.0070

Dollar/Yen: 138.87 -0.47 yen

Dollar/Euro: $1.0729 +$0.0040

Dollar Index: 103.91 -0.41

Gold: $1990. 60 +$8.50

Bitcoin: 26,867 -253

Crude Oil: $68.09 unch

DJIA: 32,789 -119

NASDAQ: 12,946 +29

S&P 500: 4185 +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.

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