January 9, 2023 – Economic News

• January 9, 2023
• realestatelife
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

MBS OVERVIEW

Three Things: These are the three areas that have the greatest ability to impact your backend pricing this week. 1) The Talking Fed, 2) Inflation Nation and 3) Treasury Dump.

1) The Talking Fed: Last week’s Minutes made it clear that the Fed is frustrated that the markets are NOT buying their message (and are actually hedging against it). This week we have a ton of speeches and it will be interesting to see if the collective message remains the same or if we start to see some cracks in their resolve. Here is a schedule for this week:

01/09 Bostic

01/10 Fed Chair Powell

01/11 Atlanta Fed Business Inflation Expectations

01/12 Harker, Bullard, Barkin and the Fed’s Balance Sheet

2) Inflation Nation: On Thursday we get the most important economic release of the week with the Consumer Price Index. Market Expectations are that we will actually see a decrease in the headline MOM reading. The weaker this data is, the better it is for pricing. We also get Import/Export Prices on Friday which is also an inflationary data point.

3) Treasury Dump: The following is this week’s schedule with Thursday’s 30 year bond auction as being the most important of the week for your backend pricing.

01/10 3 year note
01/11 10 year note
01/12 30 year bond.

At 8:30 am ET this morning the 10 yr note unchanged at 3.57%, overnight the note increased to 3.61%. MBS prices at 9 am +20 bps from Friday’s close. There isn’t much data this week but what there is doesn’t happen until Thursday with Dec CPI and Friday Dec import and export prices. Treasury will auction 3s, 10s, and 30s Tuesday, Wednesday, and Thursday; the 10 yr on Wednesday is key.

A couple of Fed speakers today; Atlanta President Raphael Bostic is due to speak at 12:30 pm, as is San Francisco Fed President Mary Daly in a separate event.

Last Friday’s BLS employment data pushed the 10 yr note down 15 bps and MBS prices +67 bps. Decline in average hourly earnings m/m and yr/yr. Dec employment rate was thought to be 3.7% unchanged from Nov, as released unemployment declined to 3.5%. Non-farm jobs increased 233K against 200K expected; private jobs +220K better than 175K expected. Average hourly earnings estimates +0.4% m/m dropped to +0.3%, yr/yr 4.6% with estimates at 5.0%. The labor participation rate at 62.3% from 62.2% .Wage inflation slowing, unemployment declining and jobs stronger than expected. The unemployment rate the lowest since 1969.

Employment data positive for lower rates trading last Friday, it wasn’t until the Dec ISM services index was released at 10 am that the strong rally in treasures really took off. The service sector has been the strongest component in the economy but for the first time since the pandemic the index fell into contraction. Dec ISM services sector index expected at 55.0 from 56.5; the index hit at 49.6, a contraction, employment 49.8 from 51.5, prices paid 67.6 from 70.0, new orders 45.2 from 56.0.

Last week Amazon announced 11K job cuts, a huge number but just 1.0% of its payroll. Over the weekend Goldman Sachs is embarking on one of its biggest job reductions, 3,200.

There isn’t any key data today.

At 12:30 pm San Francisco Fed President Mary Daly joins Nick Timiraos, The Wall Street Journal’s chief economics correspondent, to discuss her outlook for the economy, inflation and interest rates in 2023.

Pres. Biden went to the boarder yesterday, the first time. He faces criticism from both parties over the handling of surging immigrants. The House has a speaker, after 15 votes: Kevin McCarthy. Several deals were made to recalcitrant conservative Republicans, mainly on spending bills, the first challenge, to cut Internal Revenue Service funding and investigate economic competition from China.

The dollar is continuing its decline after months of increasing.

Near term technicals on the 10 yr and MBSs are positive now, we will float. Looking for the 10 yr note to work its way to 3.40% where there is a lot of resistance.