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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 +15 BPS with 60 minutes left to trade.
Inflation Nation: We got a mixed bag of inflationary data today. Headline PCE MOM increased by 0.3% vs. est. of 0.2%. YOY, it was up 5.0% vs. est. of 5.3%. Core (ex food and energy) MOM rose by 0.3% vs. est. of 0.4% while YOY it was up 4.6% vs. est. of 4.7%. Cyclical core PCE inflation, which tracks inflationary pressures that are linked to the current economic cycle, is at the highest on record going back to 1985.
Income and Spending: Personal Incomes were up 0.3% vs. est. of 0.2% and Spending was up 0.2% vs. est. of 0.3%. Private wages bounced big from 6.7% Y/Y to 7.7%; govt worker salaries dropped from 5.2% to 5.0%.
Rosie the Riveter: The March Chicago PMI continues to show contraction in the manufacturing sector with a reading of 43.8 vs. est. of 43.4.
Consumer Sentiment: The final March UofM survey reading was revised from 63.4 to 62.0. Consumer’s inflation expectations for 1 year dropped from 3.8% to 3.6% and rose for the 5 year outlook from 2.8% to 2.9%.
Inflation continued to decline with the release of march PCE this morning, inflation month/month +0.3% against forecasts of +0.4% and down from January’s 0.6%, year/year +5.0% against +5.1% expected and Jan revised from +5.4% to 5.3%. Core PCE month/month +0.3% against +0.4% and down from +0.6% in Jan; year/year core +4.6% % against +4.7% expected and unchanged from Jan. Initial reaction and trading through the day didn’t change the 10 or MBS prices, however since 3 pm ET the 10 yield has declined, MBS prices increased.
Consumer sentiment in March declined from Feb, Chicago purchasing mgrs. index weaker than forecasts. Consumers becoming a little nervous recently worrying about their bank and their savings. Media pushing that scenario, good readers if there is a crisis and media never hesitates to beat the drum.
The focus now is what will the Fed do in a month when the FOMC meets? Way too early to speculate but that is what is occurring with analysts, Fed officials, investors, money managers and traders. Between now and the meeting more inflation releases, more economic data, and more time for more bank issues to fade or increase. After two weeks and regulators all over banks the likelihood of another bank shock isn’t likely, the focus will turn to how much constriction of credit will occur. Less credit, higher rates; if credit becomes so restrictive the economy suffers, jobs are lost, consumers stop buying the Fed will have to curtail its rapid rate increases. If fears subside and upcoming inflation reports, CPI and PPI, continue to ease the Fed won’t move.
Next Week: March employment data next Friday is key. Monday March PMI final manufacturing data, Feb construction spending, March ISM manufacturing index. Tuesday Feb factory orders, Feb JOLTS job openings. Wednesday weekly MBA mortgage apps, March ADP private jobs, Feb trade deficit, PMI final march services sector index. Thursday weekly jobless claims. Friday March employment data.
This Week: 10 note yield increased 7 bps this week, the 2 year note yield increased 25 bps, MBS prices down 22 bps. The DJIA +1,036, NASDAQ +398, S&P +38. Gold increased $7.00 Crude oil had a strong week, up$6.39. Another decline in the dollar, the index at 102.56 -0.53. Bitcoin increased 631.
