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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
MBS OVERVIEW
Our benchmark FNMA MBS 6.00 August Coupon is currently up +8 BPS.
Retail Sales: We got a mixed bag with the June data. The headline Retail Sales were lighter than expectations, 0.2% vs. est. of 0.5% but May was revised higher from 0.3% to 0.5%. Ex Autos, Retail Sales were up 0.2% vs. est. of 0.3%. May was revised higher from 0.1% to 0.3%. The Control Group which is a group that would feed into the GDP data was significantly higher than expected, up 0.6% vs. est. of -0.3%.
Rosie the Riveter: The June manufacturing sector data was weaker than expected. Industrial Production was down -0.5% vs. est. for a flat 0.0%. Capacity Utilization was only 78.9% vs. est. of 79.5%
Taking it to the House: The NAHB Housing Market Index for July was solid at 56 which matched expectations.
On Deck for Tomorrow: Housing Starts and Building Permits, Weekly Mortgage Applications and a 20 year Treasury bond auction.
Interest rates edged higher this afternoon, at 9:30 am ET the 10 -4 bps, at 3:30 pm -2 bp. MBS prices followed the 10 and fell 16 bps from 9:30 am.
June retail sales this morning was softer than forecasts but still increased From May. June industrial production and factory use both weaker than estimates. The dollar has been falling for eight months and doesn’t look like it will bottom anytime soon. In the meantime, the stock market continues to increase, investors increasing belief the Fed is almost finished increasing rates. Fed-funds futures, which are used to bet on the expected path of interest rates, are pricing in nearly a 100% probability of a hike in July, but analysts also think rate cuts could come by the Fed’s January policy meeting, where futures markets already see a nearly 40% probability of a cut, according to CME’s FedWatch tool.
This morning the July NAHB housing market index was unchanged from June at 56. Current sales conditions in July rose one point to 62; sales expectations in the next six months fell two points to 60, and the gauge measuring traffic of prospective buyers increased three points to 40, the highest reading since June of last year. The three-month moving averages for regional HMI scores, the Northeast increased five points to 52, the Midwest edged up two points to 45, the South increased three points to 58 and the West posted a five-point gain to 51.
Tomorrow weekly MBA mortgage apps and June housing starts and permits; starts 1.480 mil from 1.631 mil; permits 1.489 mil from 1.491 mil.
The stock market continues to advance, as it does, we are reading more contra opinions. It isn’t news, every market that appears to have no end to it always gets increasing concerns, mostly from those that are missing out. This equity market has all the signs of being excessively overbought but we don’t see any signs of an end. Not seeing an end is the way an end begins, like a tornado. Not saying or giving any advice, I am not an equity market guy. The rally driven primarily on the longer look that interest rates over the next year or two will be lower with a potential first cut coming in January. What I do remember vividly was what occurred after Paul Volcker ended the huge increases in rates to stop inflation back in early 1980s, rates came down as they should have, until the stock market crashed, dropping the S&P almost 50 percent. Investors caught with the outlook that low rates would fuel investments. The collapse continued for months; interest rate rose on safety buying. Wall Street fell apart, firms merged and/or closed; the movement was very violent, and millions lost. Not in any way implying it will happen again when the Fed stops, just remembering a time when it did.
Amid mortgage rates near 7%, few homeowners in the U.S. are selling their homes. Out of every 1,000 homes in the U.S., only 14 changed hands over the first six months of this year, or 1.4%, according to data released Tuesday from real-estate brokerage Redfin. Before the pandemic in 2019, roughly 19 out of every 1,000 homes, or 1.9%, changed hands. Just 1.0% today.
