Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
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 June Coupon is up +1 BPS with 60 minutes left to trade.
Rosie the Riveter: After a surprise gain in April, the May Empire State Manufacturing Index dropped to its worst level (excluding the COVID shutdown). It dropped from +10.8 in April down to -31.8 in May.
The Talking Fed: Atlanta Fed President Raphael Bostic said “If there’s going to be a bias to action, for me it would be a bias to increase a little further as opposed to a cut” and that he didn’t see a reason to cut at all in 2023 even if we went into a recession.
On Deck for Tomorrow: Retail Sales, Industrial Production and Capacity Utilization, NAHB Housing Market Index.
The week began quietly today, no key economic reports. Stock indexes also quiet ahead of the debt ceiling. In the absence of other news, the focus in the media today is the debt ceiling and the increasing worry that the US will default on its debt when politicians take stands at the opposite side of the need to rein in US debt. The headline from a Bloomberg article; The risk of a US debt default is greater than it’s ever been”, Biden and republican leaders appear to be unconcerned, have only met once and will get back together tomorrow according to Biden’s press secretary. The debt ceiling is a reoccurring event, each time it comes up the handwringing seems to increase in fear mongering. There will be no debt default. If there were serious fears treasury rates would be declining and the stock market experiencing huge selling, neither is happening. At the end of the day even politicians know there is no winning in a debt default and have no real idea how the world would react.
Three Fed officials today, “My baseline case is we won’t really be thinking about cutting until well into 2024,” more work to do on our end to try to bring inflation back down,” Minneapolis Fed President Neel Kashkari said. Chicago Fed colleague Austan Goolsbee said he was close to dissenting at the May meeting that increased rates, “There is still a lot of the impact of the 500 basis points we did in the last year that’s still to come. And you add on that there are tight credit conditions. And I think that we should be extra mindful” Atlanta’s Bostic had another thought “We need to take that into account and the only way to do that is sit and watch it,”… “If you look at most measures of inflation, they’re still two times where our target is. And so that’s a long distance still to go.”
Data tomorrow April retail sales, April industrial production and factory use, March business inventories and May HAHB housing market index.
The 10 year and all of the curve have been static with little change. Same with MBS prices that increased 18 bps all of last week. Not the pattern that leads to gains by taking on risk, more like the pattern that can get you sideways and being whipped around from risk on to risk off and making wrong daily decisions. Mostly we have been conservative over the last few weeks, the only certain way to stay away from risk is to be very careful being risk on over night where a lot of movement can occur.
