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Saturday’s: 9AM 1590 AM/97.9 FM KVTA
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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 up +24 BPS with 60 minutes left to trade.
Taking it to the House: Weekly Mortgage Applications increased by a healthy 6.3%. Purchases were up 4.8% and Refinances were up 10.0%
Inflation Nation: Overall, the April Consumer Price Index data was inline with expectations. The Headline reading increased by 0.4% vs. est. of 0.4%. YOY, it was up 4.9% vs. est. of 5.0%. Core (ex food and energy) it was also up 0.4% vs. est. of 0.4% but this is ON TOP of March’s increase of 0.4%. YOY, it was up 5.5% vs. est. of 5.5%
The Talking Fed: The May Atlanta Fed Business Inflation Expectations increased from 2.8% to 2.9%
Treasury Dump: We had an important 10 year note auction today at 1:00. $35B went off at a high yield of 3.448% and a bid-to-cover ratio of 2.45.
On Deck for Tomorrow: PPI, Core PPI, Initial Weekly Jobless Claims, 30 year Treasury Bond Auction, Monthly bond coupon rollover.
CPI inflation lower than estimates, 4.9% from 5.0% in March. One step toward breaking rates lower, we must get through PPI tomorrow and import and export prices on Friday. What markets gleaned out of CPI is more conviction that the Fed has room to pause. It’s been a talking point until now but without any conviction behind it, after CPI the lowest in 2 years, core CPI in nine months lots of opinions that Fed would pause, now more reason to believe the Fed will pause in June. But will the Fed lower rates later this year? There isn’t anything more than wishful thinking swaying analysts and economists. Every Fed official is saying the same thing, the Fed has more work to do on inflation. Not willing to put my name on it yet, but more and more I wonder whether inflation will get to 2.0% this year or next, the caveat would be a serious recession and presently we don’t see that coming.
Tomorrow’s estimates for PPI: month/month +0.3% from -0.5% in March, year/year +2.5% from 2.7%. Core PPI (ex-food and energy) month/month +0.2% from -0.1% in March, year/year +3.3% from 3.4%. If the estimates turn into reality, they will mirror the CPI data this morning. Also, tomorrow weekly jobless claims thought to be 245K from 242K. Friday’s April import prices expected +0.3% from -0.6% month/month, export prices +0.2% from -0.3% in March. The negative numbers in March for PPI and import and export prices was driven by a big decline in oil prices.
Worrying about the debt ceiling, and the US defaulting on its debt? Not going to happen, the markets in the US and globally are not concerned. Maybe when it gets down to three days before a technical default, then it may be time to worry about. Financial Armageddon.
Treasury sold $35B of new 10 year notes this afternoon, not a bellwether auction, the WI trading was 3.439%, at the auction 3.448%, bid/cover 2.45 compared to the 2.41 average, indirects (foreign investors) took 67.7% a little better than the average of 64.8%. Tomorrow $21B of new 30 year bonds go on sale.
Here we are again teasing 3.40% (3.44%), is this the time for the 10 to break below it? The 2 year note declined 13 bps today and now down 31 bps in the last five days, supporting a Fed pause.
