Listen Live
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 March Coupon is down -13 BPS with 60 minutes left to trade.
Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were lower than expected, 194K vs. est. of 200K. The more closely watched 4 week moving average was very low at 189.5K. Continuing Claims were 1.696M vs. est. of 1.695M.
Inflation Nation: The January Producer Price Index was much worse than expected across the board. The headline PPI MOM was 0.7% vs. est. of 0.4% plus December was revised upward from -0.5% to -0.2%. YOY PPI was up 6.0% vs. est. of 5.4%. Core (ex food and energy) PPI MOM was up 0.5% vs. est. of 0.3% with an upward revision to December from 0.1% to 0.3%. YOY, Core PPI was up 5.4% vs. est. of 4.9%.
Rosie the Riveter: Yet another round of just dismal manufacturing data as the February Philly Fed Manufacturing Survey tanked to -24.3 vs. est. of -7.4 and follows a contraction in January of -8.9
Taking it to the House: January Housing Starts (on a seasonally adjusted/annualized basis) were 1.309M vs. est. of 1.360M. Building Permits were 1.339M vs. est. of 1.350M
The Talking Fed: Cleveland Fed President Loretta Mester said that she felt that their was a “compelling” reason for the Fed to hike by 50BPS at their last meeting vs. the 25BPS that they ended up doing. St. Louis Fed President James Bullard said that he also advocated for a 50BPS hike at the last meeting and is supportive of the Fed Funds rate getting to 5.375%.
On Deck for Tomorrow: Import and Export Prices and Leading Economic Indicators.
PPI inflation was stronger than forecasts, year/year PPI +6.0% against estimates of 5.5%. Dec PPI revised to -0.2% from -0.5%. The reaction in rate markets generally subdued compared to the reaction on CPI released on Tuesday that sent MBS prices down 25 bps. PPI hit a high of 11.7% one year ago, wholesale prices move to impact CPI in the coming months. There isn’t any change from Fed officials, the Fed will continue to increase rates to pull inflation back to 2.0%, no matter the data. Recently markets had become enamored with the idea the Fed is about finished, every Fed official including Jerome Powell have tossed cold water on that idea, finally money managers, investors, traders are seeing the light. Inflation slowing but the economy continues to resist higher rates, the unemployment rate last month fell to 3.4%, the lowest level since 1969, and retail sales jumped 3% in January as consumers broadly boosted spending on vehicles, furniture, clothing and dining out. Strength in wages and consumer spending are forces that put pressure on prices.
After a brief decline mortgage rates are increasing again (no surprise, is it?). The average rate on the standard 30-year fixed mortgage rose to 6.32%, according to a survey of lenders released today by Freddie Mac. The increase from 6.12% a week ago was the largest since mid-October, when rates rose a quarter-percentage point. Rates were just under 4% a year ago. “The economy is showing signs of resilience,” said Sam Khater, chief economist at Freddie Mac. That could further cool activity in a market that has been crippled by rising interest rates and prices. In January, housing starts slumped further.
The only report of interest tomorrow January import and export prices (imports -0.1% from +0.4%, export prices -0.2% from -2.6%. Jan leading indicators also out tomorrow, but traders pay very little attention to it because it is a compilation of other key data points through the month.
Tomorrow should be a quiet one, the beginning of a long weekend with all markets closed on Monday for President’s Day.
The key 10 year note is now ripe for improvement after increasing the last two weeks, 9-day RSI at over-extended levels that imply some consolidation. Could be tomorrow or next Tuesday. That said we don’t expect any major reversal, we will lock at the end of the day today, in the next hour.
