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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 April Coupon is up +3 BPS with 60 minutes left to trade.
Glass Half Empty: The March NFIB Business Optimism Index dropped from 90.9 to 90.1.
Treasury Dump: We kicked off three days of dumping our debt into the marketplace with our shorter term 3 year note at 1:00. $40B went off at a high yield of 3.810% and a bid-to-cover ratio of 2.59
On Deck for Tomorrow: 10 year Treasury note auction, Bank of Canada Interest Rate Decision, Weekly Mortgage Applications, FOMC Minutes, CPI and the monthly bond coupon rollover.
Another quiet day in the interest rate markets, stock indexes a little better, especially the big 30 stocks, the DJIA at 3:30 pm ET +182. No data today. In the final hour, the indexes gave up some of the improvement; concerns about inflation in the morning, day traders squaring their positions.
The IMF forecasts the U.S. economy, the world’s largest, to expand 1.6% this year, down from 2.1% in 2022. The organization projected that the global economy will grow 2.8% this year, a slowdown from 3.4% last year, as nations continue recovering from slumps caused by the pandemic and the war in Ukraine. The IMF has cautioned against economic fragmentation, or the breakup of the world trading system into rival blocs comprising either the U.S. and its allies or China, Russia, and their allies. Looking five years ahead, the IMF forecasts global economic growth of 3% in 2028, the lowest such forecast in decades.
Tomorrow will juice up the bond and mortgage markets when the CPI inflation report is reported at 8:30 am. The estimates are for inflation to have eased again, as it has over the last three months. Month to month CPI expected at 0.3% from 0.4%, year/year 5.2% from 6.0% (huge drop). The core, ex food and energy, m/m 0.4% and year/year up from 5.5% in Feb to 5.6%.
Treasury sold $30B of 3 year notes today, nothing special, the rate 3.81%, the same as trading in WI trading prior to the auction. The cover slightly better, let’s call in unchanged from last month’s 3 year auction. The last 3 year note a month ago went at 4.64%.
Tomorrow at 1 pm Treasury will sell $32B of 10s after the CPI in the morning. At 2:00 pm the FOMC minutes from the last FOMC meeting.
One way or the other tomorrow will be more active. CPI, 10 year auction, FOMC minutes. Mix in at 9:15 am tomorrow, Tomas Barkin, Richmond Fed.
The question of the day tomorrow, what will the FOMC do at its May meeting? We believe the Fed should pass on another increase now with very stern forecasts that more will be coming. The Fed should pause, too much forward uncertainty, although consumers still strong the increase in rates (credit cards) and less access for credit; the markets don’t believe consumers will slow, the IMF’s forecasts argue the rapid increase n rates will likely filter to consumers, the reason some banks are having to tighten credit and their asset/liability equations.
