NEWSLETTER
Thursday / September 29Sep 29
Friday / June 17
US mortgage sector
U.S. housing finance giant Freddie Mac said on Thursday the average contract rate on a 30-year fixed-rate mortgage rose by more than half a percentage point to 5.78%, the greatest one-week jump in 35 years.
Rates on the most popular type of U.S. home loan surged after the Federal Reserve announced it was raising interest rates by 75 basis points in an attempt to slow the economy and quell inflation, which is at 40-year-highs.
Mortgage rates have risen sharply since this time last year when the average rate on a 30-year fixed-rate mortgage was 2.93%.
The MBA's Purchase Composite Index, which covers mortgage loan applications for single family homes, increased 8.1% from a week ago. The MBA's Refinance Index rose 3.7%.
Purchase applications, however, were down more than 15% from last year as low housing stock and lack of affordability alongside climbing rates, appeared to have impacted demand.
European rate hikes
Central banks across Europe raised interest rates on Thursday, following 75 bps hike by their US counterpart the Federal Reserve.
The Swiss National Bank raised its policy interest rate for the first time in 15 years in a surprise move on Thursday and said it was ready to hike further, joining other central banks in tightening monetary policy to fight resurgent inflation.
The central bank increased its policy rate to -0.25% from the -0.75% level it has deployed since 2015, sending the safe-haven franc sharply higher. It was the first increase by the SNB since September 2007.
The Bank of England meanwhile lifted borrowing costs by the quarter point markets had expected. the BoE warned that Britain's economy would shrink in the April-June quarter.
Banking stress
An indicator of credit risk in the U.S. banking system may be showing signs of stress, as the Federal Reserve’s aggressive rate hike path ratchets up expectations of economic pain.
The so-called FRA-OIS spread , which measures the gap between the U.S. three-month forward rate agreement and the overnight index swap rate, increased to 29.50 basis points on Thursday, its widest since May 23, according to data from Refinitiv. The measure was at -11.66 bps earlier in the week.
Widely viewed as a proxy for banking sector risk, a higher spread reflects rising interbank lending risk.
Spreads on credit default swaps (CDS) of JP Morgan, Goldman Sachs, Morgan Stanley, Citigroup, Wells Fargo and Bank of America approached fresh two-year highs on Thursday.
US stocks
The Dow Jones Industrial Average on Thursday tumbled below the key 30,000 level for the first time since January 2021 as investors worried the Federal Reserve’s aggressive approach toward curbing inflation would bring the economy into a recession.
The Dow dropped 2.42%, or 741.46 points, to 29,927.07, while the S&P 500 slipped 3.25% to 3,666.77. The Nasdaq Composite slid 4.08% to 10,646.10 and touched its lowest level since September 2020.
Markets had rallied on Wednesday after the Fed announced its largest rate hike since 1994, but reversed those gains and then some on Thursday.
The major averages have suffered steep losses this week. The S&P 500 is down 6%, while the Nasdaq has fallen 6.1%. The blue-chip Dow is off by about 4.7% this week and on track for its 11th losing week of the last 12.
U.S. housing finance giant Freddie Mac said on Thursday the average contract rate on a 30-year fixed-rate mortgage rose by more than half a percentage point to 5.78%, the greatest one-week jump in 35 years.
Rates on the most popular type of U.S. home loan surged after the Federal Reserve announced it was raising interest rates by 75 basis points in an attempt to slow the economy and quell inflation, which is at 40-year-highs.
Mortgage rates have risen sharply since this time last year when the average rate on a 30-year fixed-rate mortgage was 2.93%.
The MBA's Purchase Composite Index, which covers mortgage loan applications for single family homes, increased 8.1% from a week ago. The MBA's Refinance Index rose 3.7%.
Purchase applications, however, were down more than 15% from last year as low housing stock and lack of affordability alongside climbing rates, appeared to have impacted demand.
European rate hikes
Central banks across Europe raised interest rates on Thursday, following 75 bps hike by their US counterpart the Federal Reserve.
The Swiss National Bank raised its policy interest rate for the first time in 15 years in a surprise move on Thursday and said it was ready to hike further, joining other central banks in tightening monetary policy to fight resurgent inflation.
The central bank increased its policy rate to -0.25% from the -0.75% level it has deployed since 2015, sending the safe-haven franc sharply higher. It was the first increase by the SNB since September 2007.
The Bank of England meanwhile lifted borrowing costs by the quarter point markets had expected. the BoE warned that Britain's economy would shrink in the April-June quarter.
Banking stress
An indicator of credit risk in the U.S. banking system may be showing signs of stress, as the Federal Reserve’s aggressive rate hike path ratchets up expectations of economic pain.
The so-called FRA-OIS spread , which measures the gap between the U.S. three-month forward rate agreement and the overnight index swap rate, increased to 29.50 basis points on Thursday, its widest since May 23, according to data from Refinitiv. The measure was at -11.66 bps earlier in the week.
Widely viewed as a proxy for banking sector risk, a higher spread reflects rising interbank lending risk.
Spreads on credit default swaps (CDS) of JP Morgan, Goldman Sachs, Morgan Stanley, Citigroup, Wells Fargo and Bank of America approached fresh two-year highs on Thursday.
US stocks
The Dow Jones Industrial Average on Thursday tumbled below the key 30,000 level for the first time since January 2021 as investors worried the Federal Reserve’s aggressive approach toward curbing inflation would bring the economy into a recession.
The Dow dropped 2.42%, or 741.46 points, to 29,927.07, while the S&P 500 slipped 3.25% to 3,666.77. The Nasdaq Composite slid 4.08% to 10,646.10 and touched its lowest level since September 2020.
Markets had rallied on Wednesday after the Fed announced its largest rate hike since 1994, but reversed those gains and then some on Thursday.
The major averages have suffered steep losses this week. The S&P 500 is down 6%, while the Nasdaq has fallen 6.1%. The blue-chip Dow is off by about 4.7% this week and on track for its 11th losing week of the last 12.
