MBS 5.5 down 16 bps to start the day.
Bonds had a mixed overnight session, holding flat in Asia, rallying into European hours, then selling back to unchanged after EU PMI data came out slightly stronger.
The opening few minutes of domestic trading saw a brief stint of buying (right at the 8:20am CME Open), but those gains were quickly erased after the Philly Fed data
Jan. Philadelphia Fed Non-Manufacturing Index Rose to -6.5 . This gauge of regional business activity was -12.8 in Dec. New orders rose to 10.8 vs -2.1. Inventories rose to 6.5 vs -2.6
The private sector continues to contract, according to the Flash PMI Index. “The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January. Although moderating compared to December, the rate of decline is among the steepest seen since the
global financial crisis, reflecting falling activity across both manufacturing and services. The worry is that, not only has the survey indicated a downturn in economic activity at the start of the year, but the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which
could encourage a further aggressive tightening of Fed policy despite rising recession risks.”
About 13% of adults are planning on buying a home, a decrease from 15% in the third quarter of 2022, according to research from the National Association of Home Builders. Respondents are more interested in buying an existing home than a new one.
Yield Curve remains SUPER inverted
Bonds took several opportunities to react to econ reports that don’t typically merit much of a reaction today. We saw similar behavior early in January and it made good sense in a time where markets are extra hungry for every tidbit of economic guidance. After all, everyone is waiting to see if inflation is really defeated and how soft the landing might be from the Fed’s inflation fighting efforts. Buyers were ultimately ready to buy as soon as data-driven selling pushed yields back to yesterday’s highs.
Loans in forbearance were flat at 0.7%, according to the MBA. Fannie and Freddie loans were 0.31%, while Ginnie loans were 1.45%.