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From the Desk - Economic Commentary

Scott Hofer, Member Strategies Director - 5/31/2023

U.S. stocks are lower this morning as investors watch and wait for the debt ceiling debate to be resolved. The latest negotiation narrowly cleared the House Rules Committee with a vote of 7-6 and is now headed for the House floor where a vote is expected this evening. On the economic data front, the JOLTS job openings report came in higher than expected, increasing from 9.7 million in March to 10.1 million in April. The report showed job openings increased in retail trade; health care and social assistance; and transportation, warehousing, and utilities. The job market remains strong despite rising interest rates and the probability of another 25 bps rate hike in June increased from 54.8% to 69.9% after the jobs report was released. In contrast, the Chicago Business Barometer dropped precipitously to a six-month low in May to 40.4, 8.2 points lower than the prior month and well below forecast. This is the ninth straight reading below 50, a threshold that indicates contraction territory. 

Rounding out the releases today, the Mortgage Bankers Association reported that mortgage applications were 3.7% lower for the week ending May 26. The Refinance Index and Purchase Indexes fell 7% and 3%, respectively, due to high interest rates and the perception that rates will not be falling anytime soon. The average interest rate for 30-year fixed-rate conforming loans increased 22 bps to 6.91%. 

U.S. Treasury yields are significantly lower this morning, with the 2-year Treasury yield down 17.4 basis points to 4.37%, the 5-year Treasury yield down 13.0 basis points to 3.75% and the 10-year Treasury yield down 9.6 basis points to 3.65%. Advance rates are higher on terms inside one year, higher on terms one year and greater.

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