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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
MBS OVERVIEW
Taking it to the House: The April Pending Home Sales Index (which is only an estimate and not actually a sum of all contracts signed but not yet closed) was flat at 0.0% vs. est. of 1.0%. March was -5.2%
Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were only 229K vs. est. of 245K. The prior week was originally 242K and that was revised much lower to 225K. The more closely watched 4 week moving average dropped to 237,750. Continuing Claims were 1.794M vs. est. of 1.800M.
GDP: We got the first revision to the previously released 1st QTR GDP. It was revised upward from 1.1% to 1.3%. However, the bad news is that inflation was much hotter with Prices Paid revised upward from 4.0% to 4.2%.
The Talking Fed: We will hear from Barkin and Collins today.
Treasury Dump: We have a 7 year note auction at 1 pm ET.
Two weeks ago, the 10 year note rate was 3.40%, at that time I would have bet the note wouldn’t increase to 3.80% as it is now. Two weeks ago, traders were concerned about the FOMC pause that had been getting attention. A week ago, Jerome Powell made it clear the Fed would pause. Over the last two weeks as Congress and the administration were fiddling like Nero, the debt crisis was looming, now with no resolution rates have spiked 40 bps (10 year), and 30 year mortgage rates now at 7.12% from 6.50%.
If there isn’t any relief on the debt ceiling, there isn’t going to be much improvement. Once the debt ceiling is increased (next week) look for interest rates to drop and mortgage rates will improve. Purchasers are better off now to delay locking these highs. The 2 year note, a better measure for safety now 4.53% +14 bps today; hearing some equating the 2 year increase is evidence the Fed will increase rates in June. That would make sense if it wasn’t for reason rates are increasing. Don’t read anything more into it, although Bloomberg News apparently does.
House Republican negotiators indicated they were closing in on a deal with the White House to raise the debt ceiling, with both sides wrangling over coming years’ government spending levels as talks continued; No scheduled meeting now unless a deal is very close, the House has been given permission by McCarthy to go home for the holiday until next Tuesday.
Treasury sold $35B of 7 year note this afternoon, like the 2 year on Tuesday, the 5 year yesterday, the demand was strong. In WI trading prior to the auction the bidding was 3.835%, at the auction 3.827%. The cover at 2.61 compared to 2.52 average, indirects took 72.3% against the 67.7% average.
April pending home sales this morning, sales were unchanged in April 2023, after a 5.2% slump in March which was the biggest decline since November 2022, and missing market expectations of a 1% rise. Sales sank 11.3% in the Northeast, offsetting increases in the Midwest (3.6%), the South (0.1%) and the West (4.7%).
There is data tomorrow. Inflation from the PCE (personal consumption expenditures), April personal income and spending, April durable goods orders and the final may U,. of Michigan consumer sentiment index. PCE expected +0.3% m/m from +0.1% in March, year/year +4.3% month/month from +4.2% in March; the core PCE month/month +0.3% unchanged from March, year/year 4.6% unchanged from March. April personal income +0.4% from +0.3%, spending +0.4% from 0.0% in March. April durable goods orders -1.1%, ex transportation -0.1%. U. of Michigan consumer sentiment index 58.0 from 57.7 mid-month (in April the sentiment index crashed from the mid-month to the final)…just saying.
