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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 down -31 BPS.
Taking it to the House: The May Pending Home Sales Index dropped by -2.7% vs. 0.2%.
Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were better (lower) than expected, 239K vs. est. of 265K. The more closely watched 4 week moving average ticked up to 257K. Continuing Claims were 1.742M vs. est. of 1.765M.
Ministry of Magic: The BEA “magically” revised its 1st QTR GDP upward to 2.0% after already releasing it twice at 1.3%. It was originally released on 04/27 at 1.1%, then again on 05/23 at 1.3% and now the big revision upward to 2.0%. This massive revision mainly was due to changing the consumer spending and net inventory investment data.
The Talking Fed: Fed Chair Powell spoke very early in the morning overseas reaffirming his prior day’s statement that he expects inflation pressures to “run high” and that the process of getting inflation back down to 2% has a long way to go.
On Deck for Tomorrow: PCE, Core PCE, Personal Spending and Personal Income, Chicago PMI, final UofM Consumer Sentiment Index.
Weekly jobless claims declined by 26K and well above what was expected, 239K with estimates of 270K. Q1 GDP growth expected at +1.4% grew 2.0%. The reaction sent MBS prices down, the 10 year note increased to 3.86% 2 bps higher than the 3.84% support. Stock indexes began the day flat, by the end of the session the DJIA increased 270.
The data today assures the Fed will continue to increase the FF rate with employment still strong and growth better than thought in Q1. That is today, tomorrow is another day. Tomorrow morning May inflation when the PCE is released at 8:30. The personal consumption expenditures year/year core is expected unchanged at +4.7%, if higher the rate markets will add to today’s increases. On Tuesday, the May consumer confidence index released by the Conference Board much stronger than anticipated, the index increased to 109.7 against 103.7 and up from April’s 102.5, a major month-to month increase. Tomorrow the final U. of Michigan consumer sentiment index is thought to be unchanged from the mid-month reading at 63.9. Also, tomorrow the June Chicago purchasing mgrs. index expected at 44.2 from 40.4, under 50 is considered contraction. May Personal income +0.4% unch from April, spending +0.2% down from +0.8%.
The potential for another big move in rates tomorrow is elevated with the data today and what we will see in the morning. The 10 essentially holding at its recent high yield, it has been turned back four times since the beginning of June. Powell has noted employment continues to outpace what the Fed has been thinking, he continues to warn the Fed is not done increasing rates, so too most Fed officials marching to the same beat. Until this week so far, markets have coalesced around the belief that Fed isn’t done; Powell’s comments at the ECB banking conference with the other main central bankers, his testimony to Congress last week and his press conference at the FOMC meeting last week together with today’s day’s data makes a rate increase a probability.
