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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
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 up +49 BPS with 60 minutes left to trade.
Taking it to the House: The March FHFA Housing Price Index showed a MOM gain of 0.6% which was much stronger than expected 0.2%. The March Case Shiller Metro City Index, showed a YOY contraction of -1.1% which is the first negative reading in years. The market was expecting -1.6% though.
Consumer Confidence: The May Consumer Confidence data was very low but did beat out estimates, 102.3 vs. est. of 100.0 but was a drop from April’s revised 103.7. The 12 month inflation expectations were very high at 6.1% which is down one tenth from last month.
Rosie the Riveter: The Dallas Fed’s Manufacturing Index dropped for the 13th consecutive month and dropped from -23.4 to -29.1 (vs. -18.0 exp).
The Talking Fed: Richmond Fed President Barkin said that “inflation is going to be more stubborn than many people would hope” and said that “There is a lot of uncertainty of where rates need to go,” said Barkin, though he called the current level “restrictive.”
On Deck for Tomorrow: Weekly Mortgage Applications, Chicago PMI, JOLTS and the Fed’s Beige Book
The 10 year note stuttered this morning but regained its footing at mid-day. Very early today the note traded at 3.70%, at 9:30 am ET 3.75%, then back down to 3.70% at 3 pm. MBSs rallied with the 10 on new belief a debt default resolution will happen this week. According to the news, the deal worked out between Biden and McCarty over the weekend will extend the debt ceiling until January 2025 and not much increase in military spending pushed by Republicans, the agreement holds nonmilitary spending roughly flat for the 2024 fiscal year, which begins in October, and sets a 1% cap on spending increases for the 2025 fiscal year. Military spending would increase about 3% in fiscal 2024. Other cuts, funding for the Internal Revenue Service, tighten some work requirements for the Supplemental Nutrition Assistance Program, or SNAP, and attempt to speed permitting for energy projects. The status now, The House Rules Committee is meeting, has to go through the committee before it can reach the floor.
Economists at JPMorgan Chase estimate that the deal will reduce federal spending by about 0.2% of gross domestic product per year over the two years. There is little expectations that the deal will not change the economic outlooks much. Janet Yellen out saying the drop-dead debt crisis is June 5th, giving politicians more time to fiddle while financial markets burn. For the entire month of may interest rates increased, only one day since May 12th. Mortgage rates increased 40 bps to 50 bps. Today some relief although we hear a few Republicans are not happy.
The May consumer confidence index released this morning showed a little less confidence from April. The only sectors that gained were employment and help wanted on line ads. The headline index fell in May to 102.3 (1985=100), down from an upwardly revised 103.7 in April. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—decreased to 148.6 (1985=100) from 151.8 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—decreased slightly to 71.5 (1985=100) from 71.7. The Expectations Index has now remained below 80—the level associated with a recession within the next year—every month since February 2022, except for a brief uptick in December 2022.
Tomorrow we will get the April JOLTS job openings data, expectations are for less openings, 9.350 mil from 9.590 mil in March. Weekly MBA apps and May Chicago purchasing mgrs. index, expected at 47.0 from 48.6. Normally the Wednesday prior to the employment report on Friday we would get ADPs private jobs, but it’s delayed until Thursday. Friday’s May employment looms. At 2:00 pm the Fed’s Beige Book. Also tomorrow, Fed officials, Susan Collins, Dallas, Patrick Harker Philadelphia and Phillip Jefferson Fed governor.
