Citi sticks to expense forecast as it prepares key plan for OCC

Two days after the megabank was hit with $136 million of fines, Citi executives said they aren’t changing the company’s full-year expense guidance. Citi has 30 days to submit a plan to regulators showing that the bank has allocated enough resources to achieve compliance in a timely and sustainable manner.

Mortgage Rates Shrug Off Seemingly Threatening Inflation Data to hit 5 Month Lows

Yesterday was all about the CONSUMER Price Index (CPI), which helped mortgage rates drop at the 2nd fastest pace of the year.  Today brough the PRODUCER Price Index (PPI), and the message was a bit different. While PPI is not in the same league as CPI in terms of its impact on rates, there have been several recent examples that have left a mark on the market, for better or worse.  When this morning’s installment came out, it looked like we’d have another example to count, and not the good kind. Between the new headline and the revision to last month’s numbers, annual PPI ended up a half a percent higher than the market expected. If that sort of thing happened in CPI, rates would absolutely skyrocket. Even though it was a PPI problem, it still would not have been a surprise to see at least SOME upward pressure today. But instead, rates managed to move LOWER, albeit not by much.  Still… any improvement in the wake of such numbers requires an explanation.  In this case, it came down to the underlying components of the PPI data not translating to the consumer-facing inflation metrics that guide rate policy.   In other words, sometimes higher PPI suggests upward pressure on the PCE inflation data (the broadest national measure of consumer inflation and the most closely-watched by the Fed), but today’s report did not.  Bonds initially panicked for a split second, but then eased into modestly stronger territory and stayed there all day without any drama.

Pleasant PPI Paradox Leaves This Week’s Big Victory in Focus

Pleasant PPI Paradox Leaves This Week’s Big Victory in Focus

The Producer Price Index (PPI) introduced a brief but disconcerting threat to this week’s relative level of triumph (courtesy of yesterday’s CPI) by suggesting a big, unexpected surge in core inflation at the wholesale level.  Bonds initially panicked, but quickly got back on track and never looked back.  Thankfully, the components behind the PPI surge are not the same components that would translate to PCE inflation in 2 weeks.  We can also consider PPI’s notorious volatility and conclude it would take more than one of these surprises to raise a serious eyebrow. With that, the focus of the week remained squarely on yesterday’s big CPI victory.  

Econ Data / Events

Core PPI M/M

0.4 vs 0.2 f’cast
last month revised to 0.3 from 0.0

Core Annual PPI

3.0 vs 2.5 f’cast, 2.3 prev

Consumer Sentiment

66.0 vs 68.5 f’cast, 68.2 prev

Consumer inflation expectations

1yr down 0.1
5yr down 0.1

Market Movement Recap

08:43 AM Slightly stronger overnight but giving back gains after PPI.  MBS unchanged.  10yr up 0.3bps at 4.216.

10:31 AM healing continues.  MBS up an eighth.  10yr down 1.6bps at 4.197

01:07 PM Flat and sideways at the same levels as the last update.

04:43 PM Bonds heading out at or near best levels with MBS up nearly 3/4ths and 10yr down 2.6bps at 4.187.

HMDA Data, Correspondent and Wholesale Products; Inflation and Rate Updates

“I’m sorry, but you can’t always be ‘experiencing a higher volume of calls than average.’ That’s not how averages work.” The “average” person has a student loan, or a car loan, or credit card debt, or all three. Throw in mortgage interest rates around 7 percent, homeowner’s insurance of possibly thousands of dollars, utilities, property taxes, maintenance, mortgage insurance…you get the picture. Home affordability has deteriorated due to all those reasons, not the least of which is mortgage rates, sidelining many prospective buyers from entering the housing market. But even with tight credit standards and high interest rates continuing to constrain lending growth, most homeowners (67 percent) feel that purchasing a home is still attainable, especially as consumers become less downbeat about the effect of inflation on their household finances. Expert advice can help ease the stress of buying: about 40 percent of homeowners are unfamiliar with mortgage affordability/loan programs. Certainly that’s something that good originators can help with. (Today’s podcast is found here and this week’s is sponsored by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender, uniting the people, systems, and stages of the mortgage process. Hear an interview with Loan Atlas’ Tim Braheem on the best formal education platform for individuals in the mortgage space, covering sales, time management, customer service systems, marketing, leadership, and much more.) Lender and Broker Software, Services, and Products

Bonds Holding Yesterday’s Gains Despite Hotter PPI

The Producer Price Index (PPI) is certainly not in the same league as CPI when it comes to bond market impact, but there have been several notable reactions in the past year.  It was a concern, then, to see core PPI come in 0.2 higher than expected and for last month to be revised 0.3 higher.  But while there was an initially negative reaction in the bond market, it wasn’t big and it didn’t last long. The “why” has to do with the components of PPI that directly impact the more important consumer inflation metrics like the PCE price index coming out later this month. Simply put, the big beat in PPI was driven by categories that don’t translate to PCE.