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
Our benchmark FNMA MBS 6.00 July Coupon is currently flat at +2 BPS.
Taking it to the House: May Building Permits were higher than expected as the annualized number hit 1.491M vs. est. of 1.423M and a small gain from April’s pace of 1.417M. Housing Starts were a big surprise to the upside, hitting 1.631M vs. est. of 1.400M and a big surge from April’s pace of 1.340M
On Deck for Tomorrow: Fed Chair Powell, Weekly Mortgage Applications and a 20 year Treasury bond auction.
Yesterday NAHB released its June housing market index, the index increased to 55 from 50 with forecasts at 50. All three major HMI indices posted gains in June. The HMI index gauging current sales conditions rose five points to 61, the component charting sales expectations in the next six months increased six points to 62 and the gauge measuring traffic of prospective buyers increased four points to 37. Looking at the three-month moving averages for regional HMI scores, the Northeast edged up two points to 47, the Midwest increased four points to 43, the South moved three points higher to 55 and the West posted a five-point gain to 46.
May housing starts and permits this morning. Starts in May were at a seasonally adjusted annual rate of 1,631,000, the increase from April the biggest jump since 2016. A 21.7 percent (±14.8 percent) above the revised April estimate of 1,340,000 and is 5.7 percent (±10.8 percent) above the May 2022 rate of 1,543,000. Single-family housing starts in May were at a rate of 997,000; this is 18.5 percent (±14.1 percent) above the revised April figure of 841,000. The May rate for units in buildings with five units or more was 624,000. Building permits in May were at a seasonally adjusted annual rate of 1,491,000. This is 5.2 percent above the revised April rate of 1,417,000 but is 12.7 percent below the May 2022 rate of 1,708,000. Single-family authorizations in May were at a rate of 897,000; this is 4.8 percent above the revised April figure of 856,000. Authorizations of units in buildings with five units or more were at a rate of 542,000 in May.
Tomorrow Jerome Powell will appear at the House Financial Services Committee for his semi-annual required testimony, just a week after the FOMC meeting that left the rate unchanged. Congresspeople will pepper him on where the economy is, his outlook for the future and what the Fed thinks about more rate increases. With fresh memories from last week we don’t look for any bombshells from him. Expect questions from the Committee about why the Fed paused increasing rates after 15 months of increases. With the stock market back to pre-pandemic levels there is less angst in the Committee. Back in March, his last appearance financial strains have eased, the banking failures in May brought huge criticisms of the Fed and bank regulators but that has tamed since the problems have dissipated.
Beside the headlines of Powell’s testimony tomorrow, weekly MBA mortgage applications and treasury will auction a 20 year bond, doesn’t normally get much reaction in the markets.
Rates are not moving, haven’t for the last three weeks. The 10 has very solid resistance at 3.84% if it holds there isn’t much worry that mortgage rates will increase much from present levels. Fed and other central banks continuing their inflation battles, 2.0% is where the Fed, ECB and most other banks are trying to achieve. Progress being made but with the rapid increases it is time the Fed paused. Powell still echoing the economy won’t decline into recession, supported recently by the equity markets and strong jobs, most economists agree that if there is a recession it will be mild and short-lived. I am looking for the stock market bulls to be rudely interrupted, a correction will stoke the idea the Fed is finished as be expect., as we presently expect. Hedging my outlook, if inflation data between now and the July FOMC meeting increases we get one more increase but that will do it.
