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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 January Coupon is down -18 BPS with 60 minutes left to trade.
Domestic Flavor:
Jobs, Jobs, Jobs: December Challenger Job Cuts dropped significantly from 77K down to 44K. The December ADP Employment Change was much stronger than expected, 235K vs. est. of 150K and a big jump from November’s 127K. Initial Weekly Jobless Claims were lower than expected, 204K vs. est. of 225K. The more closely watched 4 week moving average dropped to 214K. Continuing Claims dipped back below 1.7M at 1.694M.
Trade Balance: The November data was much stronger than expected with a deficit of only $-61.51B vs. est. of $-74.0B which would signal a stronger 4th QTR GDP if the shrinkage was due to exports. But it was not, it was a huge fall off in Imports which signals a slowing economy in the U.S.
On Deck for Tomorrow: Big Jobs Friday: Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings, ISM Services and Factory Orders.
Stronger jobs from ADP, less weekly jobless claims pushed the 10 to 3.77% +8 bps and MBS prices down 37 bps this morning. The DJIA down over 300 points. This afternoon some minor rebounds in rates ahead of the important BLS Dec employment data tomorrow morning.
The data this morning showed strong labor markets, what the Fed wants to see slow down. Today several Fed officials spoke, St. Louis Fed President James Bullard, one of the Fed’s hawks, said the central bank has almost raised rates as high as needed to tame inflation. Atlanta Fed President Raphael Bostic added to the subdued sentiment on Thursday after he said the central bank still has “much work to do” to tame inflation. Minneapolis Fed President Neel Kashkari said yesterday he expects rates to rise as high as 5.4%, while Kansas City Fed’s Esther George said she favors a rise above 5%, saying that the central bank should hold rates well above 5% well into 2024. The FOMC minutes released yesterday showed no officials expected a reduction in rates in 2023.
Swap rates linked to individual Fed decisions jumped and now suggest a peak in the overnight effective rate of close to 5.05% in the middle of 2023. The current target range for the Fed is 4.25% to 4.5% and there are around 38 basis points of hikes priced in for the next gathering in February. The benchmark two-year Treasury yield climbed nearly 14 basis points to 4.49%, a level last seen in November, with selling pressure being spurred by block trades in futures. The three-year yield led the selloff, rising as much as 15 basis points to 4.26%.
The average for a 30-year, fixed loan was 6.48%, up from 6.42% last week and the highest since early December, Freddie Mac said today. “Mortgage application activity sunk to a quarter century low this week as high mortgage rates continue to weaken the housing market,” said Sam Khater, Freddie Mac’s chief economist.
Now at eight votes (and the ninth about to occur) still can’t win the speaker job. Hindered by a covey of conservative Republicans. Not a good way for Republicans to begin their leadership.
Reports out that consumers are using credit cards at an increased rate, just as credit card rates are screaming higher.
Beside the Dec employment report tomorrow the Dec ISM services sector index and Nov factory orders. ISM index expected at 55.0 from 56.5; factory orders -0.7% m/m after increasing 1.0% in October (report also provides final durable goods orders).
