CHM Blog

Last Friday the bellwether 10 year note broke below 3.40%, the level that had held any improvements going back to Dec. The 10 dropped to 3.29% at mid-day on worries over regional banks, by the close Friday 3.38% down 4 bps. This morning bank shares rallying, Frist republic +27%. Bloomberg reported that US authorities are considering expanding an emergency lending facility that would give the lender more time to boost its balance sheet. First Citizens BancShares Inc. rallied 40% after it agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank. European equities climbed, with a gauge of bank stocks outperforming. Presently the fears over banks have lessened although traders will remain on edge. Fed officials will be out all week and Friday inflation (PCE), the forecast is for another decline. Fed Minneapolis President Neel Kashkari said over the weekend that bank turmoil had increased the risk of a US recession.

The potential for a recession later this year is gaining momentum with the current problems surfacing from banks that were over-leveraged. That is leading some concern that strong tightening and less cheap credit will push the economy down. Presently all forecasters are flying by the seats of the pants. There is a lot of debt out there, some believing shadow debt and its links to lenders are becoming a major cause for concern. The bank issues that have exploded over the last two weeks created new worry points that won’t be resolved for weeks, regulators scrambling, investors being bounced around by varying opinions and forecasts but presently those don’t carry a lot of water.

At 9:30 am the DJIA opened +260, NASDAQ +40, S&P +24. 10 year at 9:30 am 3.50% +12 bps. FNMA 6.0 30 year coupon -25 bps and -28 bps from 9:30 am Friday, the 5.5 30 year at 9:30 am -39 bps and -44 bp from 9:30 am Friday.

At 1 pm Treasury will auction $42B of 2 year notes.

PRICES @ 10:00 AM

S&P 500: 3994 +23

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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