CHM Blog

Yesterday MBS prices were lower. They decreased in the afternoon when the US Treasury announced it wouldn’t need to borrow as much in the 4th quarter as markets were expecting. Recent concerns that US debt would increase the amount needed to fund the debt was a factor pushing rates up, investors would demand higher returns (higher rates). The release yesterday that receipts in Q3 were higher than thought allowed Treasury to borrow less.

This morning more follow-through, the 10 year note over night increased to 4.90% +2 bps then turned lower, at 8 am ET the 10 year note at 4.80% -8 bps. MBS prices opened 16 bps higher than yesterday’s close.

The Bank of Japan statement stressed a more flexible approach to control 10 year note interest rates than in the past. “Uncertainty is extremely high within both overseas and domestic economies and financial markets,” said Governor Kazuo Ueda in a press conference following the decision. “We decided that it’s appropriate to increase flexibility so that long-term yields can be smoothly shaped, according to different future scenarios.” The BofJ increased its inflation forecasts, the reaction in markets according to news reports, investors were disappointed that the bank wasn’t more aggressive in its stance.

Q3 Employment Cost Index reported at 8:30 am, good news; the ECI increased 1.1%, expected at 1.0% but year/year ECI at 4.3% was down from 4.5% in Q2. ECI peaked at 5.1% in 2022. Get a job with the government, government employees saw a 1.5% increase in overall compensation and 1.8% in wages and salaries in the third quarter according to the release. Government compensation has risen appreciably faster than in the private sector.

August Case/Shiller home price index month/month expected to increase 0.7% as reported +1.1%, prices up for the sixth month in a row. Year/year expectations +1.6%, increased 2.2% in the 20 cities. The national index, rose on a month-over-month basis in August by 0.9%, but rose 2.6% over the past year.

At 9:30 am the DJIA opened -70 after increasing 511 yesterday, NASDAQ opened -16, S&P +3. 10 year at 9:30 am 4.87% -2 bps up from 4.80% at 8 am. FNMA 6.5 30 year coupon at 9:30 am +3 bps and +18 bps from 9:30 am yesterday.

At 9:45 am October Chicago purchasing managers index expected at 45.0 from 44.1 in Sept. Declined to 44.0, more contraction in manufacturing, under 50.

Key data this morning, October consumer confidence index, expected at 100.0 from 103.0, in September the index increased to 102.6.

FOMC meeting underway; the statement and Powell’s press conference looms over markets today. No rate increase at the meeting, focus is on what the Fed sees coming. Increasing market focus is the Fed is finished increasing rates, a view subject to change on each inflation release. Central banks tilting to ending rate hikes on the belief that recent increases are enough to drag inflation to 2.0%, and inflation is declining.

PRICES @ 10:00 AM

10 year note: 4.87% -2 bp

5 year note: 4.82% unch

2 year note: 5.07% +1 bp

30 year bond: 5.02% -4 bp

30 year FNMA 7.0: @9:30 am 101.03 -2 bp (+6 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 99.34 +3 bp (+18 bp from 9:30 am yesterday)

30 year FNMA 6.0: @9:30 am 97.25 +1 bp (+25 bp from 9:30 am yesterday)

30 year GNMA 6.0: @9:30 am 97.91 +1 bp (+27 bp from 9:30 am yesterday)

Dollar/Yuan: $7.3159 +$0.0020

Dollar/Yen: 150.95 +1.85 yen (BofJ comments this morning, see above)

Dollar/Euro: $1.0606 -$0.0011

Dollar Index: 106.46 +0.34

Gold: $2006.10 +$0.50

Bitcoin: 34,243 -221

Crude Oil: $82.34 +$0.03

DJIA: 32,853 -81

NASDAQ: 12,724 -66

S&P 500: 4157 -8

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.