August 3rd, 2022 - Market Update
Current position: Carefully floating
Stocks are higher and Mortgage Bonds are lower so far this morning. We heard from four Fed Presidents yesterday - SF Fed President Mary Daly, Cleveland Fed President Loretta Mester, Chicago Fed President Charles Evans, and St. Louis Fed President James Bullard.
Mary Daly - The fed is "nowhere near" done fighting inflation and that central bank officials are "still resolute and completely united" in the task of achieving price stability.
Loretta Mester - Expects below-trend economic growth for this year, but she did not believe the US is in a recession given the continued strength of the labor market.
Charles Evans - A 50bp increase at the next meeting in September would be appropriate. However, he left the door open and 75bp would be ok.
James Bullard - With hotter inflation numbers in the spring, we should get to 3.75% to 4% before the end of the year (150bp more of rate hikes). He also said that the US isn't in a recession because the Job market is strong.
The common theme from Fed officials is that they don't believe we are in a recession, mainly because the labor market is still strong.
First off, the spread between the 10-year and 2-year Treasury is now at -33 bps, which is a very reliable recession indicator. Additionally, we had two consecutive quarters of negative GDP in Q1 and Q2.
Add to that - We always see a recession happen when the unemployment rate is at its lowest point and then turns higher, not when unemployment is high. It's important to remember that the unemployment rate is a lagging indicator and often times you can see job gains in the first month of a recession, but then do then start to roll over.
And when looking at job openings in June, they fell 600k from 11.3M to 10.7m, which is the first time there has been under 11mm job openings since last
November. Job openings are down 1.2m over the last three months. The number of hiring's fell for a 4th straight month and the hiring rate fell to 4.2%, which matches the lowest since January 2021.
While we have not seen the unemployment rate go up yet, it likely would have last month if 353k people did not leave the labor force because after all, there were 315k job losses in the household survey. Additionally, we have seen Initial Jobless Claims consistently rise to the highest level in 8 months.
Tomorrow's Claims figure and Friday's BLS Jobs Report will be in focus, with everyone looking to see if the UR goes up.
The MBA released their Mortgage Application data for last week, showing that Purchases were up 1% last week and are down 16% year over year. Interest rates move lower from 5.74% to 5.43% and are 2.5% higher than this time last year.
Refinances increased by 2% last week and are now down 82% year over year. Refinances continue to make up roughly 31% of all transactions.
Mortgage Bonds broke beneath support at the 100-day Moving Average and 101.219 level and are now in a new range, with the aforementioned levels as resistance and a quadruple floor of support nearby, formed by the 100.603 Fibonacci level, 50-day Moving Average, 25-day Moving Average, and rising trend line.
The 10-year, after being on the borderline yesterday, unfortunately broke to the upside to our target of 2.79%. Yields have since retreated from that level, which is keeping a lid on them for now.
Source: MBS Highway
Join our Watchlist
Our Watchlist is a free service we offer to ensure you never miss an opportunity to lower your interest rate. There is no obligation associated with joining.
We’ll track rates and market conditions on your behalf, and reach out when we see an opportunity to save you money.
Questions?
Reach out any time. We’re here to help you find the best mortgage program for your unique conditions.
Contact us:
847-634-2252
info@longgrovemortgage.com
Or start an application.
