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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
Jobs, Jobs, Jobs: The February Challenger Job Cuts report saw a big drop from 103K in Jan down to 78K in Feb. Initial Weekly Jobless Claims were very low but higher than expected with a reading of 211K vs. est. of 195K. The more closely watched 4 week moving average increased slightly to 197K. Continuing Claims broke back above the important 1.7M level with a reading of 1.718M which was higher than estimates of 1.659M
Treasury Dump: We have an important 30 year Treasury bond auction at 1 pm today.
Not much movement this morning in stocks or interest rates, that changed this afternoon when the stock market came under pressure. The 10 year note 3.92% -7 bps and MBS prices at 3 pm 20 bps higher than 9:30 am. At 9:30 am the 10 3.97%, the 2 year note 5.07%, by 4:00 the 10 3.92% -6 bps, the 2 year note 4.87% -20 bps. Normally that kind of volatility ahead of very key data doesn’t happen often.
Feb employment tomorrow, as critical as it is, didn’t expect financial markets to react the way they have today. Could the rally in rates be due to higher weekly jobless claims this morning, +211K against 190K expected, not likely. The improvement today keeps the 10 year tied into very narrow trading range.
Interest rates have increased since the beginning of Feb, the 10 from 3.40% to 4.0% yesterday, the 2 year note 4.01% to 5.07 yesterday. In the time frame the debate about how much the Fed would hike swung back and forth in the media and from vested analysts. Tomorrow will be a volatile one, the direction depends on the data of course.
Powell told us on Tuesday the fed would likely increase rates more than had been expected, possibly 50 bps in two weeks at the FOMC meeting. The reason for the improvement in rates today is reflection on the beat down in equity markets. Bond traders and investors increasingly tilting toward a recession pushing safe haven moves to treasuries.
James Bullard, St. Louis Fed, saying this afternoon that he believes the Fed is serious and won’t be dissuaded by arguments of recession being worse than letting rates at high levels and inflation working deeper into the economic psychology psyche.
I submit the volatility in US financial markets today is some capitulation the Fed is very serious about raising rates higher than was expected just a week ago, and the US will fall into recession in the coming months pushing equity markets lower. The DJIA already down 2.0% this year. It is leading to safe haven movement today in the interest rate markets. We will still go into employment with no exposure; recently MBS pricing each morning doesn’t reflect the changes from previous morning levels, particularly if morning prices are under pressure, any improvements the day before are swept under the rug. That will be the case tomorrow morning if interest rates are higher and MBS prices lower.
