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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
MBS OVERVIEW
4:30 EST – Our benchmark FNMA MBS 6.00 April Coupon is down -3 BPS with 30 minutes left to trade.
Jobs, Jobs, Jobs: Initial Weekly Jobless Claims remain below 200K with a reading of 198K vs. est. of 196K. The more closely watched 4 week moving average ticked up to 198,250. Continuing Claims were very elevated but lower than expected, 1.689M vs. est. of 1.697M.
GDP: We got a look at the 4th QTR GDP for the third time. This time, it was revised lower from 2.7% to 2.6%. The Price Index remained at 3.9%.
On Deck for Tomorrow: PCE, Core PCE, Personal Income, Personal Spending, Chicago PMI, UofM Consumer Sentiment
Yet another very quiet day, three days in a row. The 10 -1 bp, MBS prices generally unchanged. No critical news for the last couple of days; tomorrow inflation data with Feb personal consumption expenditures (PCE). The inflation readings have been hallmarks for a year, this one maybe even more important as markets continue to assess the banking issues. There are media guests on WSJ, Bloomberg, Reuters and other financial news outlets offering differing opinions as to how the Fed will respond on May 3rd at the next meeting. Should the Fed slowdown? One of the reasons that some banks didn’t do well, the Fed increased rates too much and too rapidly and no risk management to deal with increasing rates after piling in on the idea rates would not increase as quickly.
Inflation data between now and the FOMC meeting will likely be the determent for the Fed. Inflation has been slowing consistently for the last three months; leading to the argument that the Fed should withhold more increases until all banks have completed and cured their liability/asset equation. Minneapolis President Neel Kashkari said it was premature to judge what impact the collapse of Silicon Valley Bank will have on the economy, but the Fed also needs to focus on lowering inflation. “What’s unclear right now is how much of the banking stresses of the past few weeks is leading to a sustained credit crunch which would then slow down the US economy”… “Banks on average have a lot of capital. The Federal Reserve and the other banking regulators are standing behind the banking system. So that should give us all confidence. It’s going to take us a while until we fully understand, are there more losses out there”… “ Banking panics and banking stresses tend to take longer than you think. In 2008, it took a couple years. I’m not forecasting that. I don’t think we have that kind of situation here,”… “The services part of the economy has not yet slowed down and wage growth is — we want higher wages — but wage growth is still growing faster than what is consistent with our 2% inflation target,” he said. “That tells me we still have more work to do to bring the services side of the economy back into balance.”
We expect the Fed will pause if inflation data between now and the meeting continues to slow. Take a break and let markets, consumers and investors gather their thoughts. If inflation doesn’t edge lower, it is a toss-up what the Fed may do at the next meeting. The central bank and other key central banks around the world continue their quest to kill inflation without generating a recession, another reason to take a break, pushing off the next increase until June 14th.
The estimates for tomorrow’s data: Feb personal income +0.3% from +0.6%, spending +0.2% from +1.8% in Jan. The inflation PCE m/m +04% from +0.6%, year/year +5.1% from 5.4%. Core PCE m/m +04.4% from +0.6%, year/year +4.7% unchanged from Jan.
March Chicago purchasing mgrs. index 43.9 from 43.6. U. of Michigan final March consumer sentiment index 63.4 from 63.4 at mid-month.
