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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 February Coupon is up +24 BPS with 60 minutes left to trade.
Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were lighter than expected, 205K vs. est. of 215K. The more closely watched 4 week moving average dropped to 212.5K. Continuing Claims were 1.634M vs. est. of 1.705M.
Inflation Nation: The December Headline CPI MOM decreased by -0.1% which is exactly what the market expected. YOY it increased by 6.5% which matched expectations and is down from November’s pace of 7.1%. Core (ex food and energy) CPI was up 0.3% on a MOM basis which is higher/hotter/worse than November’s pace of 0.2%. YOY, it was up 5.7% which was expected. While Goods inflation tumbled to its lowest since Feb 2021, Services inflation soared to its highest since Sept 1982. Real Wages dropped for the 21st month in a row!!
The Talking Fed: Philly Fed President Patrick Harker said that he supports only a 25BPS rate hike at the February meeting signaling the potential end of rate hikes after that.
Treasury Dump: We had an important 30 year Treasury BOND auction at 1 pm ET. $18B went off at a high yield of 3.585% and a bid-to-cover ratio of 2.45
In yesterday’s afternoon report we (I) talked about economic releases today, the JOLTS job openings; this what I said, “The Feb JOLTS job openings get attention, although I don’t see why, the number of openings in the millions doesn’t equate as a measurement of employment, expected at 10.4 mil from 10.824 mil in Jan”. I should be embarrassed after how markets reacted to the report this morning, but it isn’t my first rodeo. This morning the very unexpected reaction to JOLTS sent the 10 year note from 3.48% +6 bps to 3.40% in less than a minute, MBS prices from -27 bps to +9 bp. Feb JOLTS job openings dropped to 9.3 mil, a strong decline that suggests the labor market is tightening. The estimate 10.4 mil, Jan revised from 10.824 mil to 10.563 mil.
The huge decline implies jobs are getting tighter as businesses are pulling pack, good news for the Fed and the potential of a pass when the FOMC meets in a month (May 3rd). The improvement in rates today also a move to safety with current uncertainty at high levels. Stock indexes pulled back on the same news; the economic outlook based on the data is slowing. The Fed still fighting inflation but if job openings decline it is another report that encourages the stock market bears. The banking problems continue to persist, Jamie Dimon commented this morning that the repercussions will last much longer than has been expected, more severe regulations for banks’ lending and better risk management will tighten credit for consumers. His comment sent bank stocks lower and dragged the DJIA down.
JP Morgan’s Marko Kolanovic: “The Fed indicated no intention to cut interest rates this year, yet risk assets are exhibiting an unprecedented rally, with European stocks trading near all-time highs and US stocks recovering recent losses,” Kolanovic wrote in a note to clients Monday. “We expect a reversal in risk sentiment and the market retesting last year’s low over the coming months.” Kolanovic has been one of the Streets biggest optimists.
10 days ago, the 10 year note cracked 3.40% but it didn’t last, by the end of that day the 10 crawled back to 3.40%. Today the note will close below that key technical resistance.
Tomorrow weekly jobless claims, expected at 201K from 198K the prior week. Friday March employment data, both NFP and private jobs are forecast to be lower than in Feb.
Our tech models continue to point to lower rates, although under everything now uncertainty can swing rates in wide ranges. We will continue to float, today the 10 will close below 3.40%, another technical plus.
