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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 up +5 BPS with 60 minutes left to trade.
Taking it to the House: Weekly Mortgage Applications improved by 2.9%. Refinances led the way, up 4.8%. Purchases were up 2.0%. The February Pending Home Sales Index saw a MOM gain of 0.8 vs. est. of -0.3%.
Treasury Dump: We had our mid term 7 year note auction today at 1 pm ET. $35B went off at a high yield of 3.626% and a bid-to-cover ratio of 2.39.
On Deck for Tomorrow: Initial Weekly Jobless Claims, GDP revised
Interest rates didn’t move today, the second day in succession that saw little change as the market settles down after the bank mess. Stocks rallied.
Feb pending home sales were +0.8% the third month in a row sales increased. Contract signings increased in every region except in the West. Sales were lower for all four regions compared to a year ago as interest rate shock becomes digested. The Northeast PHSI raised 6.5% from last month to 72.5, a drop of 17% from February 2022. The Midwest index improved 0.4% to 84.9 in February, a decline of 16.5% from one year ago. The South PHSI grew 0.7% to 99.3 in February, dropping 21.7% from the prior year. The West index decreased 2.4% in February to 64.6, shrinking 28.4% from February 2022. The recent upheaval forced the government to guarantee the status of most mortgages amidst uncertainty in the financial market, that guarantee won’t last once markets settle and doesn’t guarantee payments.
The bank crisis will tighten credit and there will be less of it going into what is increasingly being seen as a recession coming. Federal Reserve Bank of Minneapolis President Neel Kashkari, in an interview last Thursday on CBS’s Face the Nation, said the turmoil “definitely brings us closer” to a recession and noted that officials are closely watching for signs of a widespread credit crunch. Worries floating that banks will slow lending with regulators looking over the shoulders and less deposits. Can’t wrap my arms around customers not willing to deposit money in banks, under $250K guaranteed. The present volatility will dissipate, but lending underwriting is going to tighten up.
Tomorrow the final Q4 GDP expected to be at +2.7%, unchanged from the preliminary release last month. Weekly jobless claims thought to be +195K, holding at levels pre COVID.
No one wanted today’s $35B 7 year note auction. The WI trade 3.615%, at the auction 3.626%; the bid/cover at 2.30 compared to the average of 2.52. Foreign bidders took 63.2% compared to 67.5% average.
With one exception, last Friday, the 10 has quieted in a 20 bp range from 3.40% to 3.60% for the last two weeks. Each day the absence of another bank crisis reduces the volatility. On Friday Feb PCE inflation is expected to have softened both month/month and year/year. The Fed is facing a decision, continue to increase rates and nail down inflation, or pause for a meeting to assess the results of its rapid increases more clearly (the key reason the banks had serious problems).
