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Listen Live
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 June Coupon is down -10 BPS with 60 minutes left to trade.
Retail Sales: The April Headline Retail Sales data showed only a 0.4% MOM increase vs. est. of 0.7%. Ex- Autos, it was up 0.4% which matched expectations. The strength of the report came in the Control Group which was up 0.7% vs. est. of 0.0%
Rosie the Riveter: April Industrial Production was up 0.5% vs. est. of 0.0% and Capacity Utilization was 79.7% vs. est. of 79.7%.
Taking it to the House: The May NAHB Housing Market Index surprised to the upside, hitting 50 vs. est. of 45 which is a 10 month high.
On Deck for Tomorrow: Weekly Mortgage Applications, Housing Starts and Building Permits and our 20Y Treasury Bond Auction.
Our leaders are entering the White House for more talks over the coming debt ceiling. Not likely there will be any resolution at this meeting. Pres. Biden said today he will revise his trip to Australia’s G-7 meeting next week to work on the compromise that has to take place. Janet Yellen issued another warning that treasury is about to run out of money by June 1st, for Congress and any administration it is likely years away, they never do anything until the final minute. Neither party wants this laid on their lap. Republicans are still pressing for sweeping spending cuts, while Democrats are determined to protect the president’s legislative achievements. “We are already seeing the impacts of brinksmanship: investors have become more reluctant to hold government debt that matures in early June,”. “The impasse has already increased the debt burden to American taxpayers.”
Federal Reserve Bank of Cleveland President Loretta Mester; “While monetary policy cannot affect the economy’s long-term growth rate, it can do its part by returning the economy to price stability, which is necessary for the longer-run health of labor markets, the financial system, and the overall economy,” Minneapolis Fed President Neel Kashkari yesterday, “The labor market is still hot, and we have not seen much softening in the labor market. So, that tells me that we have a long way to go before we get inflation back down,” Chicago Fed Austan Goolsbee told CNBC that it had been a close call whether he dissented against the rate hike policymakers delivered earlier this month. Atlanta Fed Pres Bostic made clear that he now favors putting policy on hold for now, he also suggested that the next move may be more likely to be up than down, given the persistence of price pressures.
Markets on hold until news emerges from Washington. The meeting is over, took 60 minutes and its over. Parties will form a committee to negotiate. With Biden rescheduling his trip next week there is no hurry now.
Tomorrow weekly MBA mortgage applications: April housing starts and permits. Tomorrow afternoon Treasury will auction 20 year bonds, normally not much interest in it from traders.
No change through the day in the interest rate markets from morning levels, 10 3.54% +4 bp, the 2 year note that better reflects the Fed outlook increased 7 bps today. The reaction to this morning’s April retail sales pushed rates up, the 10-yr yield above its 50-day moving average (3.513%) while continued selling in the late morning lifted the benchmark yield to its 200-day moving average (3.576%) where the market found support.
