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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 May Coupon is up +40 BPS with 60 minutes left to trade.
Jobs, Jobs, Jobs: March Job Openings and Labor Turnover Survey (JOLTS) showed 9.590M unfilled jobs which was lower than expectations of 9.775M. The Quits rate was 2.5%. Overall, a solid report but lower than recent trends.
Rosie the Riveter: March Factory Orders were up 0.9% which is a fairly large pivot from Feb’s contraction of -1.1%. The market was expecting 0.8%.
The Talking Fed: The FOMC began two days of meetings today that will culminate in tomorrow’s interest rate decision, policy statement and live presser with Fed Chair Powell.
Central Bank Palooza: The Reserve Bank of Australia increased their interest rate by 25BPS when the markets expected them to pause.
On Deck for tomorrow: FOMC Interest Rate and Policy Statement, Fed Chair Powell, ADP Payrolls, ISM Services PMI
For two weeks the headline has been what the FOMC will do tomorrow at its meeting, and how Jerome Powell will frame it. Still the belief tilts to 25 bp increase, its what is said in the statement and what Powell has to say. The 10 year note’s range from 3.40% to 3.60%; over the last two sessions the range has gone from one end to the other with still no direction. Yeste4rday the very strong April ISM manufacturing index increased the 10 year note 17 bps to 3.59%, today down 14 bps on more JOLTS job openings, but the lowest JOLTS, the lowest in 2 years. No matter what we say, no matter what you read or hear, the only real consensus is uncertainty. The JOLTS should have improved rates as a recession continues to be a possibility. If that were to occur the 10 would have broken its three-month range and traders were want to press it.
At one point today the DJIA was down over 600, more banks rattled the sector today. Two more banks under the gun, PacWest Bancorp and Western Alliance Bancorp, both down 20% and set off trading halts twice. The idea that bank issues were over has been tossed in the can, after the three banks that began the crisis settled the thought was it was over; not so as was evidenced today.
Janet Yellen saying yesterday Treasury may run out of money to pay its debt by early June. Meanwhile, as politicians do, nothing coming from the discussions. Although Treasury will not default, this is an annual game with political parties.
Investors running for cover, a lot of opinions and forecasts, all as thin as tissue paper; moving into safe treasuries. The 2 year note today was down as much as 20 bps as short-term protection was the trade of the day. Treasury bill yields for June topped 5% (three-month bill at 5.14%).
Tomorrow weekly MBA mortgage applications; April ADP private jobs (143K); April ISM services sector index (51.7 from 51.2). 2:00 pm FOMC.
Trading within the 20 bp range for the 10 year note speaks loudly that no certainty prevails, even with all the forecasts. Australia increased rates today, ECB will likely increase rates on Thursday. Inflation still high compared to what the Fed and other key central banks want to see, leads to the belief the Fed will not pause after tomorrow as has been expected; conversely, the Fed is trying to avoid a recession, so a pause is plausible in some thoughts. Rate hike expectations faced some pressure today, but the fed funds futures market still sees an 85.0% implied likelihood of a 25-bps increase tomorrow, down from 93.2% seen yesterday.
Crude oil continues to decline on weaker global economic outlooks. Gold increased $33.00 on safe movement. The US dollar remains in play, weaker again today.
