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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 up just +6 BPS with 60 minutes left to trade.
Genco Olive Oil: Import Prices in January fell by -0.2% which matched expectations. YOY, they were up by 0.8% which was much lower than estimates in the 2.9% range. Export Prices were much higher than expected, up +0.8% vs. est. of down -0.2%. YOY, Export Prices were up 2.3% vs. est. of 2.6%.
Indicators: The Conference Board’s January Leading Economic Indicators contracted by -0.3% which matched estimates. December contracted by -0.8%.
On Deck for Tomorrow: ***The Bond Market is CLOSED on Monday for President’s Day***
The 10 year note held its increase where we thought it would, at 3.90%. Next week expect improvement in rates, not a trend change, just a retracement after two weeks of increasing. The 10 has returned to where it began its decline taking the 10 to 3.40%, MBS rates at the low three weeks ago 6.00%, now 6.80%.
More from Larry Summers, former Treasury Secretary; “The Fed’s been trying to put the brakes on, and it doesn’t look like the brakes are getting much traction. The risk is that we’re going to hit the brakes very, very hard.” “The Fed is going to have to view the situation with a lot of humility,” said Summers, a Harvard University professor. It should “avoid locking itself in with any kind of strong pronouncements.” He isn’t yet willing to adopt to a 50 bp increase at the March FOMC meeting. The median component of consumer prices is now climbing at a pace “close to 7%,” Summers calculated — the fastest in four decades. “That has got to cause real concern about inflation”. Mohamad El-Erian continued his recent comments that the Fed’s target of 2.0% would crush the economy, thinks 4.00% is more reasonable.
An article at Bloomberg quotes Goldman Sachs and BofA that rates will have to increase more than the two firms had been expecting; now forecasting a 25 basis-point increase in June and a terminal fed funds rate of 5.25% to 5.5%, compared to previous expectations that rate increases would end in May and peak at a range of 5% to 5.25%. Based on swaps now forecasting a 25 basis-point increase in June and a terminal fed funds rate of 5.25% to 5.5%, compared to previous expectations that rate increases would end in May and peak at a range of 5% to 5.25%.
Next Week: Markets closed on Monday. Tuesday Jan existing home sales, HIS Markit manufacturing and services index for Feb. 2 year note auction. Wednesday weekly MBA mortgage apps, 5 year note auction. Thursday weekly jobless claims, Q4 GDP second reading, 7 year note auction. Friday another key inflation report with Jan personal income and spending and the PCE, Jan new home sales, final U. of Michigan consumer sentiment index.
This Week: The 10 year note this week increased 8 bps, FNMA 5.5 30 year coupon this week -6 bps. The DJIA -42, NASDAQ +69, S&P -11. Gold decline $22.00, crude oil -$3.51. The dollar index 103.90 increased 0.31. Bitcoin woke up, +3030 this week.
