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 up +35 BPS with 60 minutes left to trade.
Inflation Nation: February headline Producer Prices (PPI) decreased by -0.1% vs. est. of +0.3% on a MOM basis and came in at 4.6% vs. est. of 5.4% on a YOY basis, both were weaker than market expectations. Core (ex food and energy) was also lighter than expected, flat at 0.0% vs. est. of 0.4% on a MOM basis and up 4.4% vs. est. of 5.2% on a YOY basis.
Retail Snails: February headline Retail Sales dropped by -0.4% vs. est. of -0.3%. Ex-Autos, they were down -0.1% vs. est. of -0.1%. But the Control Group increased by +0.5% vs. est. of -1.2%.
Taking it to the House: Weekly Mortgage Applications were up 6.5%. Purchases led the way, up 7.3% and Refinances were up 4.8%. The March NAHB Housing Market Index hit 44 vs. est. of 40.
Rosie the Riveter: Manufacturing activity in March in the Fed’s NY district just cratered. The Empire Manufacturing Index contracted by -24.6 vs. est. of -8.0
On Deck For Tomorrow: ECB Interest Rate Decision, Initial Weekly Jobless Claims, Import and Export Prices, Philly Fed Manufacturing, Housing Starts and Building Permits.
Four days ago, the main concern in markets was inflation data and how high the FOMC would raise rates a week from today. By Monday, those concerns were jammed to the back of the room as SVB and Signature Bank failed leading to new fears that the system was in trouble. Since Monday, the concerns have increased, this morning in Europe Credit Suisse had a funding issue that increased those worries. Volatility in stocks and bonds increased quickly, investors moving huge money into safety of Treasuries pushing the bellwether 10 year note down 60 bps in five sessions, the sensitive 2 year note has declined from 5.0-1% to 3.75%, 125 bps. The 5.5 30 year FNMA coupon has slid 111 bps.
Intraday volatility every day with each news story. Overnight the Credit Suisse problems exploding, it occurred so late in the day in Europe that this morning’s Wall Street Journal had already been printed and sent out, nothing in the Journal about it. That kind of rapid movement isn’t something mortgage lenders, originators, banks need to confront if possible. Today once again for the eighth time since Dec the 10 year dropped to 3.40% and didn’t break through it, think what you want about technical observations, that is news. MBS prices from 9:30 am this morning are lower at 3 pm (see below). Since Dec financial markets have dealt with several issues, the Fed driving hard to reduce inflation, job growth unexpected, inflation ebbing but still higher than the Fed and Powell have made clear can’t continue, 50 bp increases in the FF rate, and war issues just to name a few. Yet after all of that and now with what is being seen as bank issues the 10 year note couldn’t crack 3.40%.
MBS prices at 3 pm this afternoon weaker than at 9:30 am, not enough for re-pricing but equally evident that assuming risk is dangerous and the kind of interday and intraday swings that can lead to being whip-sawed.
This morning’s PPI, released at 8:30 am didn’t get any focus from financial media totally consumed with new credit problems.
The blame game increasing, some are blaming the Fed for moving too quickly with too big of moves (two consecutive 50 bp increases), putting banks in precarious conditions. Fed chair Powell, believed to be one of the best, compared with Paul Volker who slayed inflation in the 80s, now he’s suffered for being slow to recognize the risk of rampant inflation (love hindsight its for losers). Now he is being faulted for not heading off the troubles at the nation’s 16th-largest lender before they blew up into a crisis. Former Fed Governor Daniel Tarullo, who oversaw the central bank’s regulatory portfolio in the wake of the 2007-09 financial crisis: “There was a supervisory failure”. Lawmakers and central bank watchers piling in criticizing the Powell-led Fed board for Republican led loosening bank regs. And as the days pass more blame will surface, that is what lemmings do. Democratic Senator Elizabeth Warren, a Powell antagonist, blasting Powell blaming him directly for SVB failure; “Powell’s actions to allow big banks like Silicon Valley Bank to boost their profits by loading up on risk directly contributed to these bank failures.” Financial media tossing gas on the explosion with doomsday questions. Some defending, Fed critic Aaron Klein of the Brookings Institution – say Powell couldn’t have been expected to know the nitty gritty details of one of the hundreds of banks the central bank supervises.
This too will pass but not likely overnight. We still believe the FOMC will increases the FF rate by 25 bps a week from today, then likely pause if the conditions are still unfolding.
Tomorrow weekly jobless claims, Feb housing starts and permits, Feb import and export prices. Whatever the releases are they won’t get much market focus.
