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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
MBS OVERVIEW
4:00 EST – Our benchmark FNMA MBS 6.00 April Coupon is down -7 BPS with 60 minutes left to trade.
There were no economic events today.
On Deck for Tomorrow: FOMC starts two days of meetings, Existing Home Sales and a 20Y Treasury bond auction.
Interest rates increased today, although well anchored in recent range; the 10 at increased to 3.50% after beginning at 3.41% this morning. The 10 tied within a 10 bp range for the last six sessions. The FOMC on Wednesday, the debate quite active, will the bank pause or move rates up 25 bps. The score board presently is a 25 bp increase. The argument against a pause, if the Fed does pause it may be construed by some that the Fed is a lot more concerned about a more serious banking issue than we know. We look for a 25 bp increase with the policy statement and Powell’s press conference indicating the present bank issues are not systematic and confined to just a few. That said, investors and money managers, bank regulators and regional bank’s working all night to comb the risks. Still hold the current concerns are over-blown presently, and do not expect any land slides in bank failures.
One of the biggest stock market bears, Morgan Stanley’s Michael Wilson saying the present stress in the banking system is the beginning of the end of the bear market. “The last part of the bear can be vicious and highly correlated,” he said. “Prices fall sharply via an equity risk premium spike that is very hard to prevent or defend in one’s portfolio.” “With the backstopping of bank deposits by the Fed/FDIC, many equity investors are asking if this is another form of QE and therefore ‘risk on”. “We argue it’s not, and instead represents the beginning of the end of the bear market as falling credit availability squeezes growth out of the economy.”…. “The events of the past week mean that credit availability is decreasing for a wide swath of the economy, which may be the catalyst that finally convinces market participants that earnings estimates are too high,” JPMorgan Chase & Co. strategists said the inverted yield curve will be “proven right,” signaling a recession ahead.
Tomorrow Feb existing home sales and Treasury will auction $12B of 20 year bonds (19 year 11 month).
The stock indexes have a pattern recently, sell today, by tomorrow. The indexes today are better, last Friday lower, last Thursday higher. Last week the three key indexes ended the week unchanged for the prior week.
Remember inflation? It was the center piece in markets for a year. Haven’t heard a word about it, and that is normal; analysts, investors, traders, and financial pundits only deal with one issue at a time. If the Fed were to pass Wednesday how will that square with its focus to drive inflation to 2.0%? That issue will begin to get focus on Thursday.
Techs on the 10 still negative although 3.40% is a rock, holding any selling, equally the 10 finds buying dry up at 3.50%. The tight range will break on Wednesday afternoon, the direction based on what the Fed says and does. How Powell will frame the banking concerns. A few bad apples…
