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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 May Coupon is down -22 BPS with 60 minutes left to trade.
Taking it to the House: Weekly Mortgage Applications edged up 3.7%. Purchases led the way with a 4.6% gain. Refinances were flat at 1.7%
Rosie the Riveter: The March Headline Durable Goods Orders were much stronger than expected, up 3.2% vs. est. of 0.8%. Ex Transportation, it was up 0.3% vs. est. of a decrease of -0.2%, Ex Defense it was up 3.5% vs. est. of 0.0%. The only weakness was Non Defense, Ex Aircraft, -0.4% vs. est. of +0.2%.
Treasury Dump: We had a 5 year note auction at 1:00 today, it was very solid. $43B went off at a high yield of 3.500% and a bid-to-cover ratio of 2.54
On Deck for Tomorrow: 1st QTR GDP, Initial Weekly Jobless Claim, Pending Home Sales and a 7 year Treasury note auction.
Seesaw, the definition of the 10 year note and MBSs over the last three weeks, the 10 trading between 3.60% and 3.40% since the beginning of March. 3.40% has stopped any improvement since last Dec. Old news I know but it is what rates have been doing and won’t change until at least next Wednesday. Yesterday the 10 declined 10 bps, today up 5 bps: MBSs a lot less volatile. Investors moving more to safe havens since the banking developed three weeks ago. More old news, the fed will increase the Ff rate next Wednesday, the question confronting investors and trader is what will happen next at the Fed. A slight consensus is the Fed will then stop increases and by the end of the year rates will decline.
Treasury sold $43B of 5 year notes this afternoon. The rate 3.50%, cover 2.54 compare43d to 2.42 over the last 12 5 year auctions, foreign buyers stepped up to take down 69.1% of it compared to the average of 65.3%.
This morning March durable goods increased a whopping 3.2% m/m lead by a 78.4% increase in new orders for nondefense aircraft and parts. Excluding transportation, durable goods orders rose a more modest 0.3%. The takeaway from the report, though, is that nondefense capital goods orders excluding aircraft — a proxy for business spending — declined 0.4% in March following a 0.7% decline in February.
In the world of politics, House Republicans’ bill raising the nation’s $31.4 trillion borrowing limit in exchange for deep cuts in government spending cleared an initial hurdle, as the GOP moved to jump-start talks with President Biden ahead of an approaching deadline for the federal government to avoid default. The vote, along party lines 219-210; it doesn’t have a chance in the Senate. It’s the beginning that is likely to last until the late minute, by June some progress that will keep US debt being paid with cuts in non-debt spending, the debt ceiling is Sept 31st. Between now and Sept we will be bludgeoned by political Ping-Pong but at the end of it a debt ceiling agreement will be reached so markets won’t be influenced much.
Tomorrow weekly jobless claims (249K from 245K), Q1 advance GDP (2.0% from 2.6% in Q4, March pending home sales (+0.4% from +0.8% in Feb). Treasury will sell $35B of 7 year notes.
No interesting news today that moved rates, same old back, and fill. News companies looking for something focused more on Tucker Carlson’s firing by FOX. The DJIA and S&P lower today following yesterday’s declines. One reason for the decline, the FDIC is reportedly mulling a cut to the bank’s rating if a deal to sell the bank isn’t reached, which would limit First Republic’s access to Federal Reserve’s funding facilities.
