April 19, 2023 – Economic News

• April 19, 2023
• realestate
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

MBS OVERVIEW

4:00 EST – Our benchmark FNMA MBS 6.00 May Coupon is up +5 BPS with 60 minutes left to trade.

Domestic Flavor:

Taking it to the House: Weekly Mortgage Applications fell by -8.8%. Purchases tanked by -10.0%. Refinances decreased by -5.8%.

Treasury Dump: We had the 20 year Treasury bond auction today at 1:00. $12B went off at a high yield of 3.920% with a bid-to-cover ratio of 2.66

The Talking Fed: Today we got the Fed’s Beige Book at 2 pm. You can read the official release here.

• Overall economic activity was little changed in recent weeks. Nine Districts reported either no change or only a slight change in activity this period while three indicated modest growth. Expectations for future growth were mostly unchanged as well; however, two Districts saw outlooks deteriorate.
• Employment growth moderated somewhat this period as several Districts reported a slower pace of growth than in recent Beige Book reports. A small number of firms reported mass layoffs, and those were centered at a subset of the largest companies.
• Overall price levels rose moderately during this reporting period, though the rate of price increases appeared to be slowing. Contacts noted modest-to-sharp declines in the prices of non-labor inputs and significantly lower freight costs in recent weeks. Nevertheless, producer prices for finished goods rose modestly this period

Across the Pond:

Great Britain: CPI YOY hit 10.1%, and Retail Prices increased by 13.5%, both hotter than expected.

Eurozone: CPI YOY 6.9% which matched estimates.

On Deck for Tomorrow: Initial Weekly Jobless Claims, Philly Fed Mfg, Existing Home Sales.

Yet another quiet day; not much change in rates. The 10 year resisted a key technical level this morning at 3.64%.

The debt ceiling is back on the burners today, House Republicans proposing an increase in the ceiling by $1.5 trillion or until March 31st 2024, asking for spending cuts that are up for a vote next week. The plan is expected to be released next Wednesday. Some hard-core Republicans are resisting, wanting more cuts. The idea is to pass the proposal and that will open up dialogue with Democrats over the stalemate that exists now, the debt limit is $31.4 trillion. Without an increase or suspension of the ceiling, the US would default on payment obligations as soon as June that would collapse the US financial system. Not to worry, one way or the other a debt increase will happen.

The Fed’s Beige Book released this afternoon, here is the overall summation: “Overall economic activity was little changed in recent weeks. Nine Districts reported either no change or only a slight change in activity this period while three indicated modest growth. Expectations for future growth were mostly unchanged as well; however, two Districts saw outlooks deteriorate. Consumer spending was generally seen as flat to down slightly amid continued reports of moderate price growth. Auto sales remained steady overall, with only a couple of Districts reporting improved sales and inventory levels. Travel and tourism picked up across much of the country this period. Manufacturing activity was widely reported as flat or down even as supply chains continued to improve. Transportation and freight volumes were also flat to down, according to several Districts. On balance, residential real estate sales and new construction activity softened modestly. Nonresidential construction was little changed while sales and leasing activity was generally flat to down. Lending volumes and loan demand generally declined across consumer and business loan types. Several Districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity. The majority of Districts reported steady to increasing demand and sales for nonfinancial services. Agriculture conditions were mostly unchanged in recent weeks while some softening was reported in energy markets.” Nine Fed Districts reported essentially no change while three reported modest growth.

Today’s $12B 20-yr bond reopening met decent demand with longer tenors extending their rebound after the completion of the sale.

Two Fed officials will speak later today, at 5:30 Austan Goolsbee, Chicago Fed; at 7:00 pm John Williams, New York Fed.

Tomorrow weekly jobless claims expected 242K up from 239K. April Philadelphia Fed business index expected at -19.4 from -23.2, more negative news coming from the NE. March existing home sales, expected at 4.500 mil from 4.580 mil.

Today the 10 increased just 2 bps while the rate sensitive 2 year note jumped 5 bps as the outlook for another 25 bp increase is gaining traction.