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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
Our benchmark FNMA MBS 6.00 July Coupon is currently up +20 BPS.
Taking it to the House: Weekly Mortgage Applications increased by 3.0%. Refinances were up 3.3% and Purchases were up 2.8%
Central Bank Palooza: We heard from ALL the bigwigs today in a Central Bankers panel in Portugal. MBS didn’t have much of a reaction to it though. Fed Chair Powell said that “I wouldn’t take, you know, moving at consecutive meetings off the table.” But that was not taken by the market as a high likelihood. He did address the possibility of a recession in the near term, when he said: “There’s a significant possibility that there will be a downturn,” Powell said, adding that it’s not “the most likely case, but it’s certainly possible.”
All Stressed Out: We will get the latest round of bank stress test results at 4:30 pm. The key for bond traders is that we will see if certain banks have too much or too little on their balance sheet. Too much and they can dump some bonds… too little and they have to bulk up (creates demand) with bonds. There were be a few twists to the last test. Here are a few of the changed assumptions for the test:
Treasury Dump: We had the 7 year Treasury note auction at 1 pm. $35B went off at a high yield of 3.839% and a bid-to-cover ratio of 2.65
On Deck for Tomorrow: Initial Weekly Jobless Claims. 1st QTR GDP revised. Pending Home Sales.
An emergency dental appointment, broken tooth. The prices are from 2:30 pm ET.
This morning at a conference with ECB, BOJ, BOE in Portugal Jerome Powell reiterated he is prepared to increase rates in July and in September saying inflation still too high and the labor market too strong. “Although policy is restrictive it may not be restrictive enough and it has not been restrictive for long enough.” Median projections released at this month’s meeting showed Fed officials expect their benchmark rate to rise by another half point this year from the current range of 5% to 5.25% to 5.5% to 5.75%.
Interest rates declined today, traders unwinding their bets the Fed would cut rates later this year. It had become embedded that by the end of the year the Fed would be lowering rates, finally that is being trashed after the FOMC meeting and cemented today at the ECB conference in Portugal when both Powell and Lagarde (ECB) implied more increases.
Tomorrow weekly claims expected to edge higher (270K from 264K), Q1 GDP final at 1.4% up from 1.3% on the preliminary release last month. May pending home sales (-0.6%).
This afternoon Treasury sold $35B of 7 year notes. The auction well bid, in WI trading this morning the note traded at 3.850%, at the auction 3.839%. The cover 2.65 compared to the average of 2.51, indirects took down 75.3% compared to 2.51. Between traders covering their bets that the Fed would be lowering rates, the auction pushed the 10 year note down to 3.71%. MBS prices at 2:30 pm +16 bps and +9 bps from 9:30 this morning.
10 year still above 3.69%, technically bearish.
