Good Wednesday morning, always the best day of the week,

MBS had another large gap down opening and has tested the low of over a decade.

The interesting piece is that no other asset classes are losing much. Equities and crypto are doing well. Treasuries are also holding. There is just a lot of selling and limited new appetite for Mortgage Bonds today.  PPI (inflation at the Producer level) did not help us, in fact it hurt at the top line level. The core was in line. This could leave one to believe the CPI may not be our friend tomorrow, but it would be hard to imagine a jump in Consumer Prices despite a weakening not likely to have a big impact on the yearly reading. There is a 37-page report from the BLS I can share if you want to geek out with me. Assuming no, the below graph does a pretty good job on when we will see a reprieve in inflation. Tomorrow, we get the Sept 2022 data so it will replace the Sept 2021 month. Sept 2021 was a low reading at .4% so even if we get another print of 0, it will only have a marginal impact on the yearly inflation reading. However, we start replacing some larger monthly numbers when October reports in November.

Inflation will come down without any additional intervention from the Fed.

At 11 AM, the Fed minutes will be released and those could cause further damage in the markets. You have plenty of reasons to lock and few to float given this environment. The ten-year bond is at 3.93 and it has tested 4%. If CPI comes in hot, you can expect the ten-year to run up and test 4.11%. Let’s hope we get lucky tomorrow and that CPI provides some relief.

Across the US, 42% of the homes Opendoor sold in August transacted for less than what it paid for them. That figure was 76% in Phoenix, though that doesn’t include revenue from service fees or other related products. Opendoor lost money on about 20% of all August sales after including service fees but excluding selling expenses. Not great news for Softbank who invested heavily in them (along with investing in WeWork).   

And last, we are not alone…

The Financial Times, reported that Realtors, mortgage brokers, appraisers and construction groups say they have lost as much as 80% of their revenue since the Fed started raising rates in March. It is certainly a tough environment.

Please remain safe and stay healthy, make today great!