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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 +9 BPS with 60 minutes left to trade.
Rosie the Riveter: The May Richmond Fed Manufacturing Index contracted again with a reading of -15 vs. est. of -10. The May Markit Manufacturing PMI cratered, contracting at 48.5 vs. April’s expansionary reading of 50.2. Markit Services PMI was a bright spot at 55.1 vs. est. of 52.6
Taking it to the House: April New Home Sales (on an annualized/seasonally adjusted basis) were 683K vs. est. of 665K, but March was revised lower from 683K down to 656K.
Treasury Dump: We kicked off three days of dumping our debt into the marketplace with our shorter term 2 year note auction today at 1:00. $42B went off at a high yield of 4.300% and a bid-to-cover ratio of 2.90
On Deck for Tomorrow: Weekly Mortgage Applications, 5YR note auction, FOMC Minutes, New Zealand interest rate decision.
The 10 year note today finally ran out of gas, as we noted this morning the 10 increased 40 bps over the last seven sessions and is due for a technical rebound. The havens into treasuries over the debt ceiling and the renewed outlook that the Fed will pause next month but will continue to increase the FF rate through the rest of the year. There was also the view a month ago the Fed would begin lowering rates later this year. Based on the various Fed officials’ comments recently that isn’t a sure thing now. Minneapolis Fed President Neel Kashkari said Tuesday that if inflation were to become more entrenched, the Federal Reserve could keep interest rates elevated for longer.
April new home sales this morning was at a seasonally adjusted annual rate of 683,000,better than 670K expected but March revised from 683K to 656K. This is 4.1% above the revised March rate. The median sales price of new houses sold in April 2023 was $420,800, marking the biggest decline since April 2020 and reflecting more purchases of cheaper houses, the average price was $510,000. The seasonally adjusted estimate of new houses for sale at the end of April was 433,000, this represents a supply of 7.6 months at the current sales rate.
No movement on the debt ceiling today. According to an article on Bloomberg some Republicans are questioning the urgency driven by comments from Janet Yellen, Treasury Secretary. I doubt that they are serious, but some are twisting it around that Republicans want a default, that is ridiculous, neither party want a default hanging around their neck, as it is a default would lay more heavily on Biden’s plate. McCarthy pleading with Republicans to stay united on their demands to avert a US default. WSJ: On the table are concessions Democrats are typically loath to consider, including rolling back spending on nonmilitary programs and then capping annual increases, as well as applying work requirements for those receiving federal benefits. Republicans have dismissed tax increases, a method that Democrats would prefer to use to close the deficit.
Treasury sold $42B of 2 year notes this afternoon. The demand was very strong, driven by haven trades. In WI trading this morning the rate at 4.315%, at the auction 4.300%. The bid/cover 2.90 compared to the last 12 2 year auctions at 2.61, foreign investors took 68.2% compared to 58.3% average, domestic buyers took 15.6%, down from 21.8% average. Last month the 2 year auction went at 3.969%.
Tomorrow weekly MBA mortgage applications as usual on Wednesday, there are no economic data points. At 1 pm tomorrow treasury will auction $43B of 5 year notes; at 2 pm the minutes from the May FOMC meeting will be released.
The 10 year note at 4 pm down 1 bp on the session and down from +4 bps this morning. MBS prices better, at 9:30 am -11 bps, at 4 pm +6 bp on the 6.0 coupon and +9 bps on the 5.5 coupon. Not much of a decline, but the first down day for the 10 since May 11th.
