UMBS opened up 27 bps.  S&P futures are up 35.75 points

After yesterday’s somewhat dire implications from quarterly data, today’s monthly numbers are surprisingly in line with forecasts.  Quarterly numbers were 0.3% higher than forecast, suggesting that today should have been 0.4 or 0.5 at least for the monthly number.

As such, the 2.8 vs 2.6 forecast for the annual number is being taken in stride and markets are focusing on the 0.3 vs 0.3 f’cast being better than expected–not that it’s actually better than the forecast, but remember that forecasts come from economist surveys and it was too late to re-survey on the fly yesterday.  Traders certainly no longer expected 0.3.

Monthly Core PCE = 0.3 vs 0.3 f’cast,      [0.3 prev]

Annual Core PCE  = 2.8 vs 2.6 f’cast,        [2.8 prev]

Personal incomes rose 0.5% MOM in March, while personal consumption rose 0.8%. Spending rose 0.8%, driven by increases in healthcare and housing. Again, I point to the vivisection  here – high consumer spending is usually associated with economic booms, however when the increased spending is driven by non-discretionary items, it doesn’t feel like a boom. Nobody gets a recreational root canal.

Yesterday’s GDP data included the Core PCE Price Index, which came in at 3.7% vs 3.4% forecast.  It suggested that today’s Core PCE Price Index reported in the Incomes/Outlays report would also be higher than forecast since it comes from the exact same underlying data.  Surprisingly enough, the monthly change in March was right in line with the 0.3% expectation (.317% before rounding).  This came down to a few issues with the most important change being upward revisions to January and February.  Bonds are happy because reality is not quite as scary as yesterday made it seem.  Trading levels reflect this as MBS and Treasuries are still a hair weaker than they were before yesterday’s data, but much stronger versus yesterday’s close.

UMBS closed up 30 bps at 99.37