March 8, 2023 – Economic News

• March 8, 2023
• realestate
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News

MBS OVERVIEW

4:00 EST – Our benchmark FNMA MBS 6.00 March Coupon is down -16 BPS with 60 minutes left to trade.

Taking it to the House: Weekly Mortgage Applications improved by 7.4%, Purchase Applications were up 6.6% and Refinance Applications were up 9.4%

Jobs, Jobs, Jobs: The February ADP Employment Change was better than expected, 242K vs. est. of 200K. The January Job Openings and Labor Turnover Survey (JOLTS) showed unfilled jobs were higher than expected, 10.824M vs. est. of 10.6M, plus December was revised higher to 11.234M

Trade Balance: The January reading was $-68.3B vs. est. of $-68.9B

The Talking Fed: Fed Chair Powell testified before the House Financial Services Committee at 10 am. The only substantive point was that he said that policymakers had not yet made up their minds on the size of their interest-rate increase later this month and said it would hinge on incoming data on jobs and inflation. We got the Fed’s Beige Book at 2 pm ET. You can read the official release here. Here are a few highlights:

• Wage increases are expected to moderate further in the coming year.
• Labor market conditions remained solid. Employment continued to increase at a modest to moderate pace in most districts.
• Several Districts indicated that high inflation and higher interest rates continued to reduce consumers’ discretionary income and purchasing power, and some concern was expressed about rising credit card debt.
• On balance, loan demand declined, credit standards tightened, and delinquency rates edged up.
• Housing markets remained subdued, restrained by exceptionally low inventory. But there was an unexpected uptick in activity beyond the seasonal norm was seen in some Districts along the eastern seaboard.

Central Bank Palooza: The Bank of Canada kept their key rate at 4.50% which was widely expected.

Treasury Dump: We had a week 10 year Treasury note auction at 1:00 today. $32B went off at a high yield of 3.985% and a bid-to-cover ratio of 2.35

On Deck for Tomorrow: Challenger Job Cuts, Initial Weekly Jobless Claims and our 30 year Treasury Bond Auction.

Choppy 10 year note trading today, last night the note increased to 4.00% +3 bps, mid-day 3.90% -7 bp, this afternoon 3.99% +2 bps. The same across the curve, the2 year note started 5.08% +7 bps, declined to 4.97% then increased to 5.06% at 3 pm. MBSs +5 bps at 9:30 am, following the chop into the afternoon -22 bps at 2 pm then at 3 pm -14 bp.

Powell at the House Financial Services Committee today reminded markets the Fed remains data dependent and will make decisions based on incoming reports. He pointed to next week’s data: CPI, PPI, retail sales headline the full calendar next week. Yesterday he said the central bank would consider raising their benchmark federal-funds rate by a half-percentage-point later this month, today remarked “I stress that no decision has been made on this,” … “but if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.” Powell repeated Wednesday that Fed officials were likely to lift rates higher this year than previously expected to bring inflation under control. Not likely to hear from Powell again until the FOMC meeting in two weeks.

Treasury auctioned $32B of 10 year notes this afternoon. It didn’t do well; in WI trading this morning the rate was 3.958%, at the auction 3.985%. Bid/cover 2.35 compared to 2.43 average, indirect bidders took 62.3% compared to 65.4% average.

Tomorrow weekly jobless claims expected 195K from 190K the week prior. Treasury will auction $18B of 30s.

The next key is Feb employment data on Friday. Look for downward revision to January’s whopping 517K jobs and the same for private jobs.