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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 -6 BPS with 60 minutes left to trade.
Taking it to the House: The January YOY metro city index from Case Shiller showed a gain of 2.5% which matched expectations but was almost half of the annual pace in December of 4.6%. The January MOM FHFA Home Price Index showed a price improvement of 0.2% vs. est. of a contraction of -0.6%.
Rosie the Riveter: The March Richmond Fed Manufacturing Index was less-worse than expected but still showed contraction with a reading of -5 vs. est. of -7.
Consumer Confidence: The headline reading was much higher than expected at 104.2 vs. est. of 101.0.
Treasury Dump: We had the shorter term 5 year note auction today at 1:00. $43B went off at a high yield of 3.665% with a bid-to-cover ratio of 2.48
On Deck for Tomorrow: Weekly Mortgage Applications, Pending Home Sales and a 7 year Treasury note auction.
Compared the last week financial markets calmed down today with little movement. The 10 increased 2 bps, but at 4 pm ET unchanged from yesterday at 3.55%. MBS prices ending the day generally unchanged.
More tidbits about banks but nothing new, just beginning to find reasons why. Poor risk management covers much of the reasons why. The Fed’s top bank regulator said today whet we have been saying, the bank’s management is to blame. Not dealing appropriately with the risk of increasing rates with the bank’s assets tied up to very low rates. Michael Barr, the Fed’s vice chairman for banking supervision, “Fundamentally, the bank failed because its management failed to appropriately address clear interest-rate risk and clear liquidity risk,”. According to Barr the concerns were brought to the banks management back in November 2021. Comments from hearings today at the Senate Banking Committee. It is the beginning of a lot of hearings and testimony that will likely last for a month or more. Mr. Barr was particularly critical of the absence of a chief risk officer at SVB, as well as its lack of preparation for rising interest rates that caused its assets to decline in value. “Essentially, the risk model was not at all aligned with reality,” “By all accounts, our regulators appear to have been asleep at the wheel,” said South Carolina Sen. Tim Scott, the top Republican on the panel. Barr will speak tomorrow. It is a shock to me that the failed banks had no clue on how to assess or manage risk, thought banks were smarter than what they appear to be.
Treasury auctioned $43B of 5s this afternoon. Unlike the soft 2 year auction yesterday the auction got reasonable bidding. In WI trading prior to the auction the rate traded at 3.675%, at the auction 3.665%. Bid/cover 2.48 compared to 2.43 average. Foreign buyers took 68.6% compared 64.6% average.
March consumer confidence better than forecasts. Consumers still happy. The confidence index expected at 101.0 from 103.4 increased to 104.2.
Tomorrow weekly MBA mortgage apps, Feb pending home sales, and Treasury will sell 7yr note to complete this week’s borrowing.
Unless another shoe drops the banking chaos is about over, now just the whys and why nots. On Friday inflation data with Feb PCE. The debate at high levels now whether the Fed will stop temporarily or keep increasing the FF rate. Inflation is declining, the forecasts for PCE are lower inflation reads, the 10 year back in its comfort zone, above 3.40%.
