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
Taking it to the House: We saw a nice bounce in Weekly Mortgage Applications after several weeks of declines. Total Applications were up 7.2% with Purchases up 7.6% and Refinances up 6.0%
Inflation Nation: The May Headline Producer Price Index (PPI) showed a MOM contraction of -0.3% vs. est. of -0.1%. YOY, it was up 1.1% vs. est. of 1.5%. Core (ex food and energy) it was up 0.2% on a MOM basis which matched forecasts and up 2.8% on a YOY basis vs. est. of 2.9%.
The Talking Fed: At 2 pm ET, we will get the latest Interest Rate Decision and Policy Statement out of our Federal Reserve. At present, the majority of the consensus estimates are for the Fed to “pause” or “skip” (or as Bryan says “hiccup”) at this meeting, however there is some room for them to move. We will also get their Summary of Economic Projections. This will carry a lot of weight as well as this is where their “dot plot” chart is derived and the bond market will be very sensitive to forward guidance of interest rates, inflation, GDP and jobs. After all of that, we get a live presser with Fed Chair Powell.
Yesterday the May CPI report confirmed inflation is slowing; this morning May PPI also came in weaker than expected. Yesterday after CPI interest began slightly lower but within two hours after the 8:30 am ET CPI report rates flipped and increased. MBS prices at 9:30 am yesterday traded +25 bps, by the end of the day down 20 bps and lenders rushed to re-price, some increased two times. May PPI expected -0.1% month/month, it declined 0.3%, year/year forecasts +1.6% as released +1.1%. Core PPI month/month thought to be +0.2% and reported +0.2%, year/year +2.8% as expected but down from 3.2% in April.
FOMC at 2 pm, until then US financial markets should be quiet. There won’t be any increase in rates at the meeting, Powell has made that clear in recent comments he wants to evaluate the impact of all the increases over the last year. Its what is in the policy statement markets will focus on and how Powell frames the outlook. Hearing a few remarks from financial press that the Fed may be finished increasing rates, although that is a stretch presently. Yesterday the abrupt swing in rates may have been fueled by Citigroup Inc. economists and those at LH Meyer/Monetary Policy Analytics in Washington are predicting a June hike. Meyer’s firm cites Powell’s emphasis on risk management, with elevated inflation and a too-hot labor market. Citi the lone ranger of big banks.
Last week MBA mortgage applications increased for the first time in four weeks; the composite +7.2% from the prior week, purchase apps +76%, re-finances +6.0%.
At 9:30 am the DJIA opened -176, NASDAQ -7, S&P -1. 10 year 3.78% -5 bp. FNMA 6.0 30 year coupon at 9:30 am -6 bps and -50 bp from 9:30 am yesterday.
There isn’t anything now until this afternoon’s FOMC meeting.
