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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
3:30 EST – Our benchmark FNMA MBS 6.00 June Coupon is up +14 BPS with 90 minutes left to trade.
Treasury Dump: We had two auctions today. The 3 year note saw $40B go off at a high yield of 4.202% and a bid-to-cover ratio of 2.70. The 10 year note saw $32B go off at a high yield of 3.791% and a bid-to-cover ratio of 2.36.
On Deck for Tomorrow: Consumer Price Index, 30 year bond auction, FOMC begins two days of meetings.
Tomorrow’s CPI estimates are lower than in April, May core CPI year/year expected 5.3% from 5.5%. May PPI core year/year +2.9% from 3.2% in April. Inflation going down, the Fed expected to pause on Wednesday at the conclusion of the FOMC meeting. The policy statement and Powell’s press conference expected to tilt to another hike at the July meeting. The 10 year note today unchanged at 3.74%. MBS prices gained. The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the May 2023 Survey of Consumer Expectations, which shows that inflation expectations declined at the short-term horizon to their lowest level in two years, while they increased slightly at the medium- and longer-term horizons. Labor market expectations were mixed with expected earnings growth declining, and unemployment expectations and perceived job loss risk improving. Households’ perceptions and expectations for credit conditions and their own financial situations all deteriorated slightly. Median home price growth expectations increased for the fourth consecutive month from 2.5% in April to 2.6% in May, the highest reading since July 2022.
Treasury sold $32B of 10s this afternoon, the rate higher than in WI trading at 3.791% (WI 3.776%). Demand was somewhat soft compared to the average, ,indirects took 62.3% compared to the average of 64.6%.
The consumer remains strong, confounding the Fed and most economists. Wages inching higher but the Fed seems to being ignoring. A couple of months ago it was whether a recession would be needed to slow inflation but presently the tide is turning a little, that recession may be avoided, and the Fed is coming close to the end of its rate increases. Inflation forecasts, 4.1% -0.3% this year, 3.0% three years +0.1% out, and five years +2.7% (0.1%) The Fed and ECB still hang on 2.0% but if the projections turn out accurate inflation won’t come close for years. Leads o the idea that possibly central banks may have to increase their targets. The ECB meeting is on Thursday.
Crude oil helping on the inflation front; over the last two months oil price has declined from $84.00 to $67.00 today.
Is the stock market really in a bull market? The S&P climbed on the boat, trading above 4300. From what we are reading those bears that have stood strong that the stock market was headed for a decline have been couching those opinions.
The 10-yield climbed to 3.80%, the key chart resistance, and declined to 3.71% at one point before ending unchanged.
There is so much to digest this week it isn’t likely any improvement until at the earliest Wednesday afternoon. MBS prices held well although we want to keep locked, uncertainty is the dominant theme now. A lot of forecasts, lots of opinions, but too much risk.
