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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
MBS OVERVIEW
Half Full: The June NFIB Small Business Optimism Index increased from 89.4 to 91.0 and beat out forecasts of 89.9. The June IBD/TIPP Economic Optimism will hit at 10 am.
The Talking Fed: St. Louis Fed President Bullard will speak today.
Treasury Dump: We kick off three days of dumping our debt into the marketplace with today’s shorter term 3 year note auction at 1 pm.
At about 4:30 am ET this morning the 10 year note traded down to 3.96% -4 bps from yesterday, by 8:30 am the note at 3.98% -2 bps. MBS prices began trading with the 6.0 30 year coupon +5 bps. The only data point today, the June NFIB small business optimism index expected at 89.8 from 89.4 in May, the index increased to 91.0. This afternoon at 1 pm Treasury will auction $40B of 3 year notes.
More weakness in Europe, the July ZEW Economic Sentiment index in the Eurozone fell to -12.2 from -10.0 (expected -10.2). In Germany Economic Sentiment fell to -14.7 from -8.5 (expected -10.5) and July ZEW Current Conditions fell to -59.5 from -56.5 (expected -60.0). June CPI was up 0.3% month/month, as expected (last -0.1%) and up 6.4% year/year, as expected (last 6.1%).
No news today that impacts US interest rates, nothing I can find. Today is about tomorrow, the June CPI inflation data. Yesterday afternoon May consumer credit was reported, credit card credit increased by $8.5B to $1.254 trillion. Nonrevolving credit decreased by $1.3B to $3.611 trillion. Consumer credit increased at a seasonally adjusted annual rate of 1.8% in May. Revolving credit increased at an annual rate of 8.2%, while nonrevolving credit decreased at an annual rate of 0.4%. Credit expansion in May was the slowest since November 2020, having been slowed by a decrease in nonrevolving credit that will raise concerns about a tightening in lending standards and weaker demand for credit in the face of higher financing rates.
At 9:30 am the DJIA opened +123, NASDAQ +15, S&P +9. 10 year at 9:30 am 3.99% -1 bps. FNMA 6.0 30 year coupon at 9:30 am +4 bps and 20 bps higher than 9:30 am yesterday; the 5.5 coupon +19 bps and 29 bp better than 9:30 am yesterday.
At 1 pm $40B 3 year note auction.
June CPI tomorrow is expected to show a decline; the month/month CPI +0.3% from +0.1% but year/year +3.1% from 4.0%. The core CPI, the more important expectation +0.3% month/month from +0.4%, year/year 5.0% from 5.3%.
The last three days interest rates have ticked lower and MBS prices higher, as we noted the rate market was ready for a pullback after the recent spike, overbought technically. Today may trade quietly ahead of tomorrow’s news. There has been no let up from Fed officials from Powell to all regional Fed banks that the Fed must keep going, we will see tomorrow how traders see it when the data is released at 8:30 am.
Not looking for any additional improvement in rates today with CPI and Thursday’s PPI inflation data ahead.
