MARKET WRAP UP

“Knowledge is the Key to Success….Timing is the Key to Profits”

Yesterday saw some volatility in US financial markets continuing to react to the FOMC and Powell on Wednesday that made it clear the Fed isn’t about to cut interest rates. Not only now but the rest of the year and into 2027. Prior to the FOMC interest rates have increased from 4.00% to 4.30% (10 yr note). Also, yesterday the ECB that had been on a rate cut path the past year commented the next move may be increasing its base rate.

Crude oil price this morning began with a little volatility, overnight WTI price increased $2.00, by 9:00 down $1.00. Markets new momentary concern, comments frm Trump on possibly taking over Kharg Island Iran’s major oil supply depot. Israel saying it will no longer attack natural gas fields in the region. Brent crude oil futures fell to $107/ barrel on Friday amid volatility, after US Treasury Secretary Scott Bessent indicated Washington may soon lift sanctions on Iranian crude held on tankers, brent has traded as high as $119.00/barrel recently.

There isn’t any economic news today. This is triple-witching day, March contracts for the three main indices, which expire today, may generate volatility in equity markets. The market remains concerned with the ongoing volatility in the price of oil and persistent geopolitical uncertainty heading into the weekend.

The Iranian conflict dominates all thinking these days. How long? What is the outlook for inflation and economic growth? With the Fed sidelined for the next year will it lead to stagflation? These are the debatable elements facing the world presently. When the Hormuz Straits re-open oil prices will decline in rapid and large moves and all the present fears will turn to the next concerns, whatever they may be.  Presently there isn’t any view interest rates will decline.

At 9:30 the DJIA opened -34, NASDAQ -127, S&P -19. 10 yr at 9:30 4.32% +7 bps, breaking above 4.30% a critical support level. FNMA 5.0 30 yr coupon at 9:30 -47 bps frm yesterday’s close and -21 bp frm 9:30 yesterday. The 5.5 FNMA coupon -30 bps and -13 bp frm 9:30 yesterday.

Our benchmark FNMA MBS 5.500 April Coupon is down -46 BPS at 3:00 PM ET.

There were no domestic events today.

Central Bank Palooza: The People’s Bank of China kept their interest rate at 3.00%.

Summary: Long bonds had a negative reaction to the escalating Iran War, blowing through our primary support level and landing on our secondary/failsafe support level which also does not look terribly solid at this point.

The chart on the left shows which items impact Mortgage Backed Security trader’s decision to sell or to add to their positions. The arrows indicate if it is helping pricing or pressuring pricing. Thus, a green arrow is good for your back end pricing and red arrows are bad. Each category is given a different weight. For example, a change in central bank policy will impact pricing more than the stock market will. Also weight for certain categories will change from time to time. For example, years ago – the stock market had a very large influence on bond prices, but has almost no influence now. But that could flip back, so the weighting may change due to that.

Note: My metrics above inform you on what impact these items have had over the past four weeks and specifically on today’s trades. But they do not point the way towards future pricing. I do provide intra-day and longer term lock advice in our Morning Coffee Update and Video.

Since the close last Tuesday and the day prior to the FOMC and Powell, the 10 year note yield has increased 18 bps, the 5.0 FNMA 30 year coupon price increased 130 bps. 30 year mortgage rate now 6.40%.

The Iranian situation is inflating the economy while economic growth is expected to slow, that is stagflation. The consensus in the markets held the Fed would cut interest rates at least twice, maybe three times two weeks ago, then Epic Fury. Even then markets were unwilling to believe inflation and uncertainty would not hold back the Fed. Three days after the shock and awe attack it became clear the US could not keep the Hormuz Straits open, and the selling of treasuries and stocks began in earnest.

Presently the outlook for interest rates is as negative we have seen this year. It can flip quickly though when oil begins to move.

Next week’s calendar; Monday January construction spending. Tuesday 2 year note auction, Q4 final productivity and unit labor costs, March PMI manufacturing, March unit labor costs. Wednesday MBA mortgage applications, 5 year note auction, Q4 current account deficit, Feb import and export prices. Thursday weekly jobless claims, 7 year note auction. Friday University of Michigan final March consumer sentiment.

This Week: The 10 yield increased 10 bps, 2 year +15 bps. FNMA 5.0 coupon +76 bps. The DJIA 983, NASDAQ -457, S&P -126. Gold -$525, crude oil +$0.91. The dollar index +0.36. Bitcoin -1,307.

The last gasp, optimistic views held since February are out the window. No rate cuts, increasing inflation. We warned but few believed.

PRICES @ 4:00 PM

10 year note: 4.39% +14 bp

5 year note: 4.00% +12 bp

2 year note: 3.89% +9 bp

30 year bond: 4.96% +12 bp

30 year FNMA 5.0: 98.08 -89 bp (-42 bp from 9:30)

30 year FNMA 5.5: 106.06 -61 bp (-31 bp from 9:30)

30 year GNMA 5.0: 98 56 -73 bp (-38 bp from 9:30)

Dollar/Yen: 159.24 +1.53 yen

Dollar/Euro: $1,1560 -$0.0029

Dollar Index: 99.63 +0.40

Gold: $4,511.00 -$94.70

Bitcoin: 69,768 -497

Crude Oil: $98.81 +$2.67

DJIA: 45,577.47 -443.96

NASDAQ: 21,647.61 -443.08

S&P 500: 6506.48 -100.01

Poland

WALUTY

POŻYCZKI HIPOTECZNE

UMBS 30YR 5.0 98.17 -0.82    95.71 100.50 UMBS 30YR 5.5 100.11 -0.58    98.11 101.64 10 YR Treasury 4.386 +0.136    3.932 4.590