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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 May Coupon is up +18 BPS with 60 minutes left to trade.
Taking it to the House: March New Home Sales were much stronger than expected, hitting 683K on an annualized basis vs. est. of 634K and a nice jump from the Fed pace of 623K units. The Feb FHFA Housing Price Index increased by 0.5% on a MOM basis vs. est. for a fall of -0.2%. The YOY Feb reading for the Case Shiller 20 metro city Home Price Index showed an annual home price gain of only 0.4% but that was better than expectations of only 0.1%.
Rosie the Riveter: The April regional Richmond Fed Manufacturing Index dropped from -5 to -10, estimates were for -9.
Consumer Confidence: The Conference Board’s survey declined in April from a downwardly revised 104.0 in March down to 101.3 in April. The 12 month inflation expectations were 6.2%.
Treasury Dump: We kicked off three days of dumping our debt into the marketplace with our shorter term 2 year Treasury note auction at 1 pm today. $42B went off at a high yield of 3.696% and a bid-to-cover ratio of 2.68.
On Deck for Tomorrow: Durable Goods Orders, 5YR Treasury note auction.
Once again, the 10 year note dropped to 3.40%, with the exception the beginning of April on the March employment data when the 10 briefly fell below it, it has held all rallies since last Dec. Is this time different? The late afternoon improvement yesterday on new fears in the banking sector with First Republic reporting taking the 10 year from 3.52% at 4 pm to 3.49% not only held together but continued to decline. . The news ignited renewed concerns about the health of regional banks and speculation that overall lending will be pressured. MBSs kind of left behind yesterday and this morning, MBS prices did gain a little from 9:30. This is all treasuries with mortgage prices hanging on. The KBW Regional Banking Index fell by as much as 4% — hitting its lowest level since November 2020 — as First Republic’s drop dented sentiment across the sector that has been slammed by the collapses of Silicon Valley Bank and Signature Bank. Late yesterday and this morning investors piled into safe havens.
April consumer confidence unexpectedly declined, estimates 104.0, the index fell to 101.3 the lowest confidence since July 2022.
March new home sales were much stronger than forecast at 634K reported at 683K, below the March 2022 estimate of 707,000 as interest rates moderated. A 9.6 percent (±15.2 percent) above the revised February rate of 623,000 but is 3.4 percent (±12.7 percent). The median sales price of new houses sold in March 2023 was $449,800; the average sales price was $562,400.
Treasury sold $42B of 2s this afternoon, nothing stood out, the auction was about normal compared tot eh averages.
Next week markets fully expecting a 25 bp increase. The policy statement and Powell’s press conference may lead markets to think the Fed is done increasing rates; money managers are mixed about what to expect from inflation going forward. Some of the big money managers believe the Fed is intent to drive inflation down, regardless of a recession and high unemployment, while others don’t believe a recession is inevitable. Not news, that has been the divide for months. The divide between investors with trillions at stake reflects just how tough monetary policy itself has become, particularly as price pressures — from the US to the UK and the euro area — remain stubbornly high, and with readings of headline and underlying inflation sending mixed signals.
Tomorrow weekly MBA mortgage apps. March durable goods orders, US March trade deficit. Treasury will auction $43B of 5s.
It is high risk expecting the 10 year will drop below 3.40% tomorrow, but we will hold a long position, at 4:00 pm 3.39%. Techs near term positive, the stock market declined. The banks sector back in play.
