CHM Blog

Marking time ahead of the FOMC statement and Powell’s press conference tomorrow. The meeting is starting now with a lot to plow through. The Fed will not increase rates tomorrow, that is a given based on every economist, analyst and trader; the Fed does not want to surprise markets. The issue is inflation outlooks have changed over the last two weeks, the markets reassessing inflation forecasts as well as the fed. Wages have held steady, the number of job openings has declined, the labor participation rate improving. If that isn’t enough the recent increase in energy prices has become concerning for the Fed. The view that the Fed may have one more increase in November then halt rate increases in 2024 has been the recent consensus, not as much so now with wages likely increasing, energy prices increasing.

Crude oil has increased 30% the last 90 days, this morning at $93.00 up $1.21 at 8:30 am ET. When crude prices increased in the 70s, early 80s, and in 1992 the economy rolled over. Now it is about how long energy prices will stay high and possibly increase further. The FOMC has a lot to think about. The Fed generally doesn’t put much emphasis on food or energy prices focusing all its attention on the core (ex-food and energy), believing both are transitory and volatile elements that don’t last long. Mark Zandi, chief economist at Moody’s Analytics; “The run-up in oil prices is at the very tip top of my worries at this point, “Anything over $100 for any length of time and we’re going to be very sick.”

At 8:30 am August housing starts and permits; starts fell hard to 1.283 mil against 1.435 mil and 1.447 mil in July. Permits increased to 1.543 mil against 1.440 mil expectations and 1.443 mil in July.

At 9:30 am the DJIA opened -30, NASDAQ -62, S&P -10. 10 year note 4.35% +4 bps. FNMA 6.0 30 year coupon at 9:30 -8 bps from yesterday’s close and +12 bps from 9:30 am yesterday.

The 10 year note at 4.35%, the key technical level that has held since October 2022. Will it hold? Depends on how markets take the policy statement, the 2 year Fed projections and Powell’s press conference tomorrow.

PRICES @ 10:00 AM

10 year note: 4.34% +3 bp

5 year note: 4.49% +4 bp

2 year note: 5.10% +6 bp

30 year bond: 4.41% +2 bp

30 year FNMA 6.0: @9:30 am 99.72 -8 bp (+18 bp from 9:30 am yesterday)

30 year FNMA 5.5: @9:30 am 98.03 -13 bp (+12 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 98.47 -15 bp (+14 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2935 +$0.0018

Dollar/Yen: 147.66 +0.05 yen

Dollar/Euro: $1.0695 +$0.0003

Dollar Index: 105.00 -0.20

Gold: $1954.70 +$1.30

Bitcoin: 27,192 +429

Crude Oil: $92.32 +$0.85 (high this morning $93.60)

DJIA: 34,496 -128

NASDAQ: 13,602 -109

S&P 500: 4432 -22

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.