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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
Three Things: These are the three areas that have the greatest ability to impact your backend pricing this week. 1) Inflation Nation, 2) Central Bank Palooza and 3) GDP
1) Inflation Nation: We get the Fed’s key inflation gauge on Friday with PCE as well as Personal Incomes and Spending. Will this follow the recent softening in CPI and PPI or buck the trend? The weaker this data is, the better it will be for pricing.
2) Central Bank Palooza: We get a key interest rate decision from the Bank of Canada on Wednesday, they are expected to raise by only 25BPS.
3) GDP: We get the final look at the 3rd QTR and our first look at the 4th QTR GDP data on Thursday.
Treasury Dump: We have a batch of shorter to mid-term notes this week
01/24 2 year note
01/25 5 year note
01/26 7 year note
The Talking Fed: The media blackout period has started leading up to the next FOMC meeting so we wont be getting any comments from any members of the Fed regarding their policy this week.
Check the main page for Bryan’s video break down
After failing to crack 3.40% last week the 10 yr note began the session +5 bps at 3.52%. Stock indexes at 8:30 am ET a little better, MBS price at 8:30 am -17 bps.
Not much direct news this morning that traders are concerned with, each day closes in the FOMC next Wednesday when the Fed will increase the FF rate by 25 bps and likely talk about inflation slowing (not news, everyone knows it), and 25 bps is already discounted in present rate levels. More job cuts from tech companies, Spotify today cutting 6.0% of its workforce (600 jobs); not many compared to the 10s of thousand cuts already announced. Not sure of the total but guessing, 80K job cuts in total.
Finally, Fed officials taking a break before the FOMC meeting next week. This week’s key economic data doesn’t hit until Thursday and Friday, in the meantime it’s a trader’s market. The key 10 yr, as we noted over a week ago, found key support at 3.40% testing it last week three times.
The Fed may be taking a break, but big firms have opinions to share; Morgan Stanley strategist Michael Wilson commenting. One of the most vocal bears on US stocks worrying that present levels of stocks are not paying attention to the current economic data that reflects the slowing economy. Recent optimism around a less hawkish Federal Reserve, China reopening and a weaker dollar is already priced into share prices, he wrote in a note. Wilson ranked No. 1 in last year’s Institutional Investor survey.
Dec leading economic indicators at 10 am expected -0.7% but slipped just 0.1%.
All data this week is on Thursday and Friday (see calendar below), Not expecting major changes this week, at least until Thursday, and even then, not much reason to believe interest rates will decline much and very unlikely the 10 yr note will breach 3.40%. The next resistance for the 10 yr 3.60%. Until FOMC next Wednesday market focus will be on bets on what the FOMC and Powell will say about the future. It is nice no Fed officials will have anything to say until then. The key report this week hits on Friday with the next inflation report, the Dec PCE.
This Week’s Calendar
10 am Dec leading indicators (-0.7%, as reported -0.1%)
9:45 am Jan Flash manufacturing index (46.5 services +45.5)
10 am Jan Richmond Fed manufacturing index (-3 from +1)
1 pm $42B 2 yr note auction
7 am weekly MBA mortgage apps
1 pm $43B 5 yr note auction
8:30 am weekly jobless claims (202K from 190K)
Q1 advance GDP ( +2.7% from Q4 3.2%; personal consumption expenditures +2.6% from Q4 2.3%)
Dec Durable goods orders (+2.8%, ex transportation -0.2%, core capital goods -0.2%)
Dec advance US trade deficit (-$88.5B)
10 am Dec new home sales (614K from 640K in Nov)
1 pm $35B 7 yr note auction
8:30 am personal income and spending (income +0.2%, personal consumption-0.1%; PCE index m/m 0.0% from +0.1%, yr/yr 5.0% from 5.5%; core PCE +0.3% m/m and +4.4% yr/yr from 4.7% yr/r)
10 am U. of Michigan consumer sentiment index (64.6 unch from mid-month)
Dec Pending home sales (-1.0%)
