June 26th, 2023 9:35 AM by Richard Sardella MLO.100007700/NMLS 233568
The 10 year note at 9 am ET 3.69%, MBS price +9 bps from Friday’s 13 bp increase. The 10 at key chart support at 3.69% that has held since June 1st. There isn’t any data today, at 1 pm Treasury will sell $42B of 2 year notes.
Last week’s Jerome Powell testifying has presently increased the view the Fed is serious about reducing inflation even if it means breaking the US economy to accomplish. Media reporting traders are increasingly believing he isn’t kidding. Doesn’t square though with Friday’s 5 bp decline on the 10 year note and 5 bp decline on the 2 year note. A recent poll from the Markets Live Pulse survey predict the US yield curve will remain inverted into 2024, half of those surveyed still expect two more 25 bp increases, 19% saying the Fed is over. According to the data from Bloomberg the only two longer periods of inversion were those of August 1978 to May 1980 and September 1980 to October 1981 going back almost half a century.
Rates started a little better this morning, likely motivated by the weekend mutiny in Russia when Yevgeny Prigozhin, leader of the Wagner mercenary group, began a march on the Russian capital but stopped short of getting there with his army, 200 kilometers from Moscow. Not much additional news coming from Russia, Prigozhin and Putin both quiet after Putin called his move treason. Troops loyal to Russian mercenary advanced hundreds of miles toward Moscow at breakneck speed only for him to suddenly call off the assault and agree to go into exile with all charges dropped in a late-night deal. It is about Russia’s inability in Ukraine. Markets are not reacting much, with little details but in Russia Putin is losing his grip and may not run for President again in 2024. The US had intelligence several days ago that Prigozhin was plotting to take armed action against Russian defense officials, according to a person familiar with the matter.
The debate over the equity market outlook continues to rage; looks like a 50/50 outlook for the moment with half advisors saying equities are still a buy, while others telling clients the outlook is bearish and stocks are extremely overbought and valuations exceed reality.
At 9:30 am the DJIA opened +10, NASDAQ -15, S&P -3. 10 year note 3.72% -2 bp (up from 3.69% at 8 am). FNMA 6.0 30 year coupon at 9:30 am +2 bps from Friday and +8 bps from 9:30 am Friday.
There isn’t any data today, this afternoon Treasury will begin this week’s borrowing with $42B of 2 year notes.
The Russian situation initially pushed yields lower but by 10 am most of the early gains were losing traction. The 10 dropped to key support at 3.69% the lowest since June 1st at 8 am. Jerome Powell scheduled to speak on Wednesday, key inflation data on Thursday and Friday.
The 10 year note at 10 am down just 1 bps from Friday, tested and held key support early this morning. 10 trading below its 20 day average and finding hard support at 3.68% overnight.
PRICES @ 10:00 AM
10 year note: 3.72% -2 bp
5 year note: 3.98% -2 bp
2 year note: 4.75% unch
30 year bond: 3.81% unch
Libor Rates: 1 month 5.148%; 3 month 5.544%; 6 month 5.690%; 1 year 5.925% (6/23/23)
30 year FNMA 6.0: @9:30 am 101.07 -6 bps (+1 bp from 9:30 am Friday)
30 year FNMA 5.5: @9:30 am 99.95 +4 bp (unch from 9:30 am Friday)
30 year GNMA 5.5: @9:30 am 99.92 +6 bp (+11 bp from 9:30 am Friday)
Dollar/Yuan: $7.2347 +$0.0548
Dollar/Yen: 143.51 -0.21 yen
Dollar/Euro: $1.0911 +$0.0017
Dollar Index: 02.72 -0.19
Gold: $1935.80 +$6.20
Bitcoin: 30,480 +103
Crude Oil: $69.25 +$0.09
DJIA: 33,745 +18
NASDAQ: 13,565 +75
S&P 500: 4361 +13
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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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.