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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 down -4 BPS with 60 minutes left to trade.
Domestic Flavor: We had a very light day for economic data (again).
The Talking Fed: NY Fed President John Willams spoke at the Economic Club of New York that “We haven’t said we are done raising rates” and “I do not see in my baseline forecast, any reason to cut interest rates this year.”
Optimism: The April NFIB Business Optimism Index dropped from 90.1 to 89.0. The May IBD/TIPP Economic Optimism fell from 47.4 down to 41.6
Treasury Dump: We kicked off three days of dumping our debt into the marketplace with today’s shorter term 3 year note at 1:00. It was a very solid auction with $40B going off at a high yield of 3.695% and a bid-to-cover ratio of 2.93.
On Deck for Tomorrow: CPI, Core CPI, 10 year Treasury note auction
Will interest rates ever move? It has been over two months and no real change in the 10 year note or MBSs; it’s the same in the stock market, the DJIA in a month-log flat range. On one hand is the Fed done, on the other hand is inflation ever going to retreat to 2.0% as the Fed wants, and if you have three hands, is a recession imminent. Seems like eternity with no directions. Today the 10 year 3.53% +3 bps, the DJIA essentially unchanged.
Tomorrow markets get inflation for April with CPI tomorrow and Thursday PPI. The current estimate for CPI tomorrow; m/m +0.4% from +0.1% in March, year/year 5.0% unchanged from March; core CPI +0.4% the same as March, year/year 5.5% down from 5.6%.
Lot of talk about the debt ceiling coming due, not to worry somehow it will be averted. Some media continue to see it as a potential calamity. At 4:00 pm Pres. Biden will meet with House Speaker Kevin McCarthy and other congressional leaders at the White House. No deal today, but it is a start. It’s they’re first in three months and comes after both have dug ever-more-firmly into their respective positions. Ahead of the meeting both McCarthy and the White House pushed back against the idea of implementing a short-term extension to the ceiling. Same ole brinksmanship. With the li9mit coming up Treasury will reduce the size of Thursday’s four-week and eight-week bill sales to $35B from $50B and $35B from $45B, respectively. According to the calendar there are just seven days this month the House, Senate and the Pres. are in town together; May 9.10,11,12 15 16 and 17th.
Treasury sold $40B of 3 year notes this afternoon, it saw huge strong bidding. In the WI market prior to the auction, it traded at 3.723%, at the auction the rate was 3.695%. The bid/cover 2.93 compared to the average of 2.55; foreign investors gobbled up 73.3% compared to 60.1% while domestic buyers took just 13.7% compared to 19.4%.
New York Fed President Williams said that inflation remains too high, adding that the Fed has not said that it is done raising rates.
