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
4:00 EST – Our benchmark FNMA MBS 6.00 April Coupon is down -4 BPS with 60 minutes left to trade.
Inflation Nation: February headline Consumer Prices (CPI) increased by 0.4% on a MOM basis and 6.00% on a YOY basis, both matched market expectations. Core (ex food and energy) was a smidge hotter on the MOM reading at 0.5% vs. est. of 0.4%. YOY, it matched expectations at 5.5%. Rent inflation was up 8.76% which is the highest on record. Shelter Inflation was up 8.10%, also a new record.
On Deck For Tomorrow: Weekly Mortgage Applications, Retail Sales, Empire Mfg Index, Producer Price Index, NAHB Housing Market Index.
Volatility in US financials continued this afternoon, this morning the DJIA climbed 500 points, the 10 year note traded as low as 3.47% then as the stock market rolled over the 10 yield increased to 3.65%. At 3 pm ET 3.62% +4 bps. MBS prices at 9:30 am down 27 bps, at 3 pm -14 b bps. The DJIA went negative at 3 pm when a Russian jet crashed into a drone, then into the close found its footing. The very sensitive 2 year note traded AT 3.80% -20 bps early today, then increased to 4.40% +40 bps this morning, at 4 pm 4.21% +22 bps.
Some relaxation after the banking system was rattled but still the markets are on edge. CPI this morning was right on forecasts (m/m core expected +0.4% increased 0.5%). Regional banks got tagged yesterday, today there was improvement as the fear of a total breakdown waned. Regional bank stocks “represent one of the best risk/reward in many years” in the wake of the rout, Baird analyst David George wrote in a Tuesday note. “Extreme fear and negative sentiment” have been driving the selloff, but “we believe the risk of contagion is generally low and believe investors should take advantage of weakness to add exposure to the group.” The centerpiece for banks today was First Republic that got hammered yesterday as investor fears turned to panic. PacWest Bancorp surged 64% and Western Alliance Bancorp rose 53%. Bigger lenders such as Bank of America Corp. and Citigroup Inc. also advanced.
Tomorrow Feb PPI, the forecast is m/m at 0.3% from 0.7% in Jan, year/year 5.4% from 6.0%; core PPI m/m +0.45 from +=0.5%, year/year 5.2% from 5.4%. If that is the case, it will ease some building pressure on the FOMC next week. Increasingly hearing the Fed should refrain from increasing, even 25 bps but that isn’t likely. Some chatter the Fed should just end rate increases this year. When markets face shocks as we had yesterday there are always wide differences. Powell will have a lot to answer next Wednesday.
Other data tomorrow, Feb retail sales expected -0.3% from +3.0% in Jan, ex autos +0.2% from 2.3%. NAHB March housing market index at 41 from 42 in Feb.
We don’t expect markets will settle down until the FOMC meeting, and then it depends on what the Fed does. Bowing to market pressures if more volatility occurs it wouldn’t surprise if the Fed passes on any increase, although it will take a lot of chaos to get the Fed to step aside.
