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Bonds got a good amount of selling out of the way last week as markets finally picked up what the Fed has been putting down for months. All it took was a 500k+ NFP the week before. Throughout the week, the upcoming CPI report (Tue, Feb 14) loomed large as the next big input for the rate outlook. History is presently being defined. The stakes are high. Each update on NFP and CPI adds a chapter in the story of how the Fed (defeated/was overcome by) inflation and how the economy had (a soft landing/a completely avoidable recession). Bonds are hangin’ tough this morning despite a growing list of corporate bond issuance. It wouldn’t be a surprise to see things stay much more range-bound until tomorrow’s data.
More Data to Prove The Fed’s Point; Rates Don’t Like It It will take one of two things for the current rising rate trend to run its course. Either the economic data needs to shift in a compelling way or the selling needs to take rates back up to 2022’s highest rates at which point markets will conclude a compelling economic shift is imminent. Neither option is “fun” for the mortgage/housing market. Today’s CPI wasn’t as much of a barn burner as the jobs report 2 weeks ago, but it was high enough to prove the Fed’s persistent point regarding stubbornly elevated inflation. Econ Data / Events Core CPI m/m 0.4 vs 0.4 f’cast, 0.4 prev last month revised up from 0.3 Headline CPI m/m as expected at 0.5, but… last month revised up from -.1 to +.1 Market Movement Recap 09:18 AM First move was weaker after CPI, followed by a quick recovery and now back to slightly weaker territory. 10yr up 2.9bps at 3.732. MBS down an eighth of a point. 10:45 AM Weakest levels now with 10s up 6+ bps at 3.768 and MBS down almost 3/8ths of a point. No new motivations, just an ongoing reaction. 01:47 PM Decent recovery since noon, but still down 3/8ths on the day in MBS. 10yr still up 5bps at 3.75+ (off previous highs of 3.80). 02:50 PM Little-changed from previous update with 10yr up 6bps at 3.764 and MBS down just over 3/8ths. No major reaction to Fed speakers.
Given the hotter inflation reported in Tuesday’s CPI data, can mortgage rates go above the 2022 peak of 7.37%?
The 15-year fixed-rate mortgage followed suit, up to an average of 5.25% from 5.14% the previous week. Last year, the 15-year fixed rate averaged 2.93%. The increase in long-term rates comes after four straight weeks of decreases. Mortgage rates have eased from the 7% peak seen in November as the Fed slowed down its monetary … [Read more…]
Mortgage rates for 30-year fixed mortgages rose this week, with the current rate borrowers were quoted on…
Consumer prices continued to rise in October, but at a slower annual pace, suggesting that the Federal Reserveâs interest rate hikes are having an impact on consumer spending habits. The Consumer Price Index (CPI) rose by 7.7% in October compared to one year ago. That is the smallest 12-month increase since the year ending in […]
Americans anticipate income growth to slow and inflation to stay elevated in the Federal Reserve Bank of New York’s survey of consumer expectations. Median expected growth in household income declined 1.3 percentage point to 3.3% in the January survey, the largest monthly drop in data going back almost ten years, the New York Fed said … [Read more…]
Given that today’s bond trading volume has already eclipsed yesterday’s, it’s fair to say traders were every bit as anxious to trade this data as we expected. With the numbers coming in roughly in line with forecasts, it’s no surprise that the volume lacks a decisive directionality so far. But while it may not be decisive, one direction has been a bit more prevalent than the other (the red kind). High volume and moderate weakness aside, this report has thus far resulted in about as small of a reaction as could have been expected for such a hotly anticipated report. If things don’t get too much weaker, today’s candlestick will end up fitting nicely inside the downtrend we introduced in yesterday’s recap as well as the 3.76% technical level that’s been tested as a ceiling over the past 3 days. There are several Fed speakers on tap throughout the day with Barkin speaking moments ago, Logan at 11ET, Harker at 1ET, and Williams at 2:05 ET.
If the Fed said they would buy mortgage backed securities, mortgage rates would fall even if the 10-year doesn’t go lower.