CHM Blog

Inflation slowed in October based on this morning’s CPI data. Month/month CPI expected +0.1% reported unchanged, year/year expected at 3.3% reported at 3.2% and down from 3.7% in Sept. The core, excluding food and energy, month/month expected at +0.3% increased 0.2%, year/year core thought to be 4.1% was at 4.0%. Good data. The initial reaction in markets jumped the DJIA +310, the 10 year note yield dropped to 4.45% -14 bps. The reaction on the 2 year note yield declined 16 bps to 4.88%. Prior to the data trading in futures markets was a 30% chance of a rate increase at the Dec FOMC meeting, the reaction cut the percentage to 7.0%.

The core CPI +4.0% is the lowest since Sept 2021. Overall CPI the first time in 15 months there was no increase in retail inflation, driven somewhat by lower gas prices. The cost of gasoline dropped 5.3% last month and largely accounted for the flat CPI reading last month. The cost of food rose 0.3% last month, however, and added to the stress on households. Grocery prices have risen 5% in the past year following big increases in both 2021 to 2022. The cost of shelter — the biggest expense for most families — rose a milder 0.3% last month. Rents were up a sharp 0.5% on the month and 7.2% in the past year. Medical costs showed a 0.3% advance in October and rose for the third month in a row. The increase largely reflected a change in how the government calculates them.

One common comment that is circulating after the data, the Fed is finished as we continued to forecast, now with inflation flat the idea of Fed rate cuts next year has increased. Hearing and reading those being interviewed now talking four rate cuts next year. It is a moving target though and swings with each inflation reading.

The soft inflation saving the DJIA, yesterday the index had a minor “death cross”, what many consider a serious technical change. The 50-day moving average closed fractionally under the 200-day average known as a death cross, today’s inflation data saved the bell so to speak, with the index increasing over 300 points.

Congress has until Friday to pass a continuing resolution to keep the government operating. The House speaker, Mike Johnson saying this morning a bill will pass.

At 9:30 am the DJIA opened + 358, NASDAQ +276, S&P60. 10 year at 9:30 am 4.43% -20 bps. FNMA 6.5 30 year coupon at 9:30 am +68 bps from yesterday’s close and +81 bps from 9:30 am yesterday.

PRICES @ 10:00 AM

10 year note: 4.45% -18 bp

5 year note: 4.45% -21 bp

2 year note: 4.86% -18 bp

30 year bond: 4.61% -15 bp

30 year FNMA 7.0: @9:30 am 102.19 +52 bp (+70 bp from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 101.12 +68 bp (+81 bp from 9:30 am yesterday)

30 year FNMA 6.0: @9:30 am 99.64 +87 bp (+100 bp from 9:30 am yesterday)

30 year GNMA 6.0: @9:30 am 100.30 +103 bp (+117 bp from 9:30 am yesterday)

Dollar/Yuan: $7.2673 -$0.0232

Dollar/Yen: 150.80 -0.92 yen

Dollar/Euro: $1.0833 +$0.0135

Dollar Index: 104.55 -1.07

Gold: $1970.40 +$20.20

Bitcoin: 36,519 +48

Crude Oil: $79.17 +$0.88

DJIA: 34,822 +485

NASDAQ: 14,080 +313

S&P 500: 4492 +80

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.