Stocks are higher this morning despite US strikes on Iran overnight. Bonds and MBS are down.
As expected, the Fed maintained interest rates at current levels, but there were three dissents – Hammack, Kashkari and Logan. The statement was much more terse than what we have become accustomed to post the residential real estate bubble. The 10 year bond yield moved higher after the meeting, ending at 4.7%. Currently, the Fed Funds futures are leaning 2:1 towards a 25 basis point hike in September.
The press conference seemed to put investors on edge, with many now questioning Warsh’s commitment to reducing inflation. Warsh pointed out that the long end of the curve has risen since the June meeting, which acts as a tightening. The 30 year bond yield rose 11 basis points in the aftermath of the Fed meeting. The December Fed Funds futures see 1 hike this year as the most likely outcome followed by two.
Note a 3 vote dissent is quite rare.
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Non-QM continues to grow as lenders are finding investor demand insatiable for non-QM paper . For evolving originators/lenders, are you ready to move from non-delegated to delegated / bulk delivery?
If you’re prepared to take the next step , hedge your production with Eris SOFR Swap futures (“Eris SOFR”). Eris SOFR is being used to hedge non-QM pipelines so that mortgage companies can accumulate loans
while reducing interest rate risk and selling bulk for greater pay-ups.
Eris SOFR is the most efficient, cost-effective, and liquid way to hedge non-QM loans. Trading volume in June topped $100bn for the month, averaging around
50,000 contracts ($5bn) per day. July 8th featured an Eris SOFR “Royal Flush,” with trades recorded in every actively-quoted tenor on the swap curve from 1-year to 30-years.
CME Group launched Eris Options – Options on Eris SOFR Swap futures – for CFO’s and Capital Markets teams that want to address volatile pull-through expectations.
Reach out to John Douglas, Eris innovations Sales Director, at john.douglas@erisfutures.com for more information.
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Personal incomes rose 0.2% MOM and personal consumption expenditures (spending) rose 0.3%. The spending and income numbers were a touch below expectations. The PCE Price Index fell 0.1% MOM and rose 3.7% YOY. The core rate rose 0.1% MOM and 3.3% YOY.
PennyMac reported second quarter earnings of $1.39 per share. Production volume fell 8% YOY to $34.9 billion. Correspondent volume decreased while direct-to-consumer increased. Margins increased from 55 basis points to 77 basis points.
