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Today the FOMC meeting gets under way with markets hoping, expecting more specifics from the Fed on its tightening schedule in the coming months. We won’t know anything today, at 2 pm ET tomorrow the Fed will release the policy statement then Jerome Powell’s press conference. Markets expect the unwinding of the Fed’s support but as is normal ahead of an FOMC meeting uncertainty increases. Four rate increases this year and unwinding the balance sheet is what has been telegraphed by most every Fed member the last few weeks.
Treasury will auction $55B of 5 yr. notes at 1 pm this afternoon.
At 9 am this morning Nov Case/Shiller and FHFA home price indexes. Case/Shiller expected +1.0%, as reported +1.2%, yr./yr. +18.3%. FHFA expected +1.0%, as reported +1.1%, yr./yr. +17.5%.
At 9:30 am the DJIA opened –350, NASDAQ -219, S&P -57. 10 yr. 1.75% -2 bp. FNMA 3.0 30 yr. coupon +5 bps from yesterday’s close.
At 10 am the Jan consumer confidence index from the Conference Board was expected at 111.9 from 115.8 from Dec; as reported the index was 113.8. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—improved to 148.2 from 144.8 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined to 90.8 from 95.4.
Early this morning the 10 yr. rate increased to 1.79% but quickly retreated to 1.75% by 8:30 am. Volatility high with the chaos in the stock market. Through the day the stock indexes are unreliable until the final hour (3 pm to 4 pm). Interest rates today not likely to move much with the FOMC looming tomorrow afternoon. Since the beginning of January until last Wednesday the 10 yr. note yield ran from 1.55% to 1.90%, since last Wednesday the note has corrected and consolidated at this morning’s 1.75%, that is volatility and has roiled the MBS market and mortgage lenders. We expect that kind of volatility for the rest of the week. So far, we don’t see the US markets acting in any way over the Russian/Ukraine tensions. The US and NATO increasing support for Ukraine, US putting 8500 troops on high alert but unless NATO engages militarily the US can’t employ troops on its own.
The recent increase in rates across the yield curve have increased to discount at least one FF rate increase and possibly two increases. Interest rates will likely stabilize now unless the Fed adds more aggressive signals.
PRICES @ 10 AM
10 yr. note: 1.73% -4 bp
5 yr. note: 1.52% -3 bp
2 Yr. note: 0.99% unch
30 yr. bond: 2.08% -4 bp
Libor Rates: 1 mo. 0.108%; 3 mo. 0.248%; 6 mo. 0.449%; 1
yr. 0.793% (1/24/22)
30 yr. FNMA 3.0: 102.27 +5 bp (+11 bps at 10 am)
30 yr. FNMA 3.5: 104.33 -9 bp
30 yr. GNMA 3.0: 102.19 +5 bp
Dollar/Yuan: $6.3290 -$0.0018
Dollar/Yen: 113.88 -0.10 yen
Dollar/Euro: $1.1278 -$0.0048
Dollar Index: 96.20 +0.28
Gold: $1840.80 -$0.90
Bitcoin: 36,638 +6
Crude Oil: $83.72 +$0.40
DJIA: 33,706 -658
NASDAQ: 13,491 -364
S&P 500: 4301.-109
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