Listen Live
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
4:00 EST – Our benchmark FNMA MBS 6.00 May Coupon is down -14 BPS with 60 minutes left to trade.
Jobs, Jobs, Jobs: The April Challenger Job Cuts showed 66,995 corporate announced cuts vs. March’s pace of 89,703. Initial Weekly Jobless Claims were inline with estimates, 242K vs. 240K. The more closely watched 4 week moving average ticked upward to 239,250. Continuing Claims were 1.805M vs. est. of 1.863M
Rosie the Riveter: The preliminary 1st QTR Non Farm Productivity report was worse than expected, down -2.7% vs. est. of -1.8%. This was due to a huge surge in Unit Labor Costs which were up 6.3% vs. est. of 5.5% and a big jump from the 4th QTRs pace of 3.3%
Trade Deficit: The March total Trade Balance was -$64.2B vs. est. of -$63.3B.
Central Bank Palooza: The European Central Bank increased their main interest rate by 25 BPS and warned that their inflation outlook continues to be too high for too long. Even though the ECB slowed the pace of their rate hikes from 50BPS to 25BPS, ECB President LaGarde said “Its very clear that we are not pausing”.
On Deck for tomorrow: Big Jobs Friday! Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings, Laborforce Participation Rate, U6 Underemployment Rate.
One of the choppier days we have had in a while. Up and down, MBS prices improved, then backed down, and over and over this morning. The 10 in new territory, trading below 3.40% but looks tentative today. Tomorrow the April employment report likely keeping traders touchy today. The stock indexes lower teasing treasuries. Investors continue to move to safety in treasuries and away from equity markets with recession outlooks increasing presently. Jerome Powell yesterday had the forum to speak on it but eased away from any opinion without the “if”. The problem with banks continues to surface, also pushing investors away from risk and into the safety of treasuries. On the debt ceiling, there will not be a debt default, the more likelihood now is the debt ceiling will be lifted so no limit, that isn’t comfortable for lower rate expectations.
Few want to make much of it, but the banking sector is being microscoped. Banks got off on the wrong foot when rates were low, lending long-term using short term rates to fund them. The $2.5B SPDR S&P Regional Banking exchange-traded fund on pace for its lowest since October 2020. The rout in banks is pressing the broader market, with the S&P 500 briefly paring losses amid gains in some big tech names, but still heading toward its fourth straight decline.
The DJIA is now the lowest of the year. The rate markets almost the lowest of the year. Today it is seen mostly in the 2 year note where investors run to for safety, today -13 bps and at the lowest of the year. Look at as a battle between potential recession and central banks potentially increasing rates. Presently the thought the Fed will pause is slightly dominating, working against what the Fed has been saying about inflation and the war against it.
Tomorrow at 8:30 am April employment data.
After a choppy trade today, the 10 year from 3.40% to 3.30%, MBS prices swinging back and forth, we will end the day with little change at the long end of the curve but lower at the short end in volatile trading (at 3:15 the 2 year note was down 13 bps, at 4:00 down just 5 bps.
