Friday – February 17, 2023
Aaaand to finish the week off right, MBS down 16 on the open – again
Slightly weaker out of the gate in Asia with additional weakness in Europe, but some resilience heading into domestic hours
US equity futures and European stocks dropped in the face of hawkish comments from Federal Reserve and European Central Bank officials that ramped up investors’ expectations of higher interest rates. The dollar rallied and bonds fell.
Federal Reserve Bank of Cleveland President Loretta Mester said she had seen a “compelling economic case” for rolling out another 50 basis-point hike, and St. Louis President James
Bullard said he would not rule out supporting a half-percentage-point increase at the March meeting. ECB Executive Board member Isabel Schnabel warned that markets risked underestimating inflation.
MBS are now below 100 on the 5.5. Ceiling is a Fibonacci at 100.094 – then 100 day at 100.284. Dual floors at 99.845 – and 99.711. Can float, though tough to find hope of lower. Just buying days
The March Fed Funds futures are now factoring in a 21% chance of a 50 basis point hike at the March meeting. The 10 year yield has moved up dramatically in the past 2 weeks.
The Index of Leading Economic Indicators declined again in January, according to the Conference Board. Among the leading indicators, deteriorating manufacturing new orders, consumers’ expectations of business conditions, and credit conditions more than offset strengths in labor markets and stock prices to drive the index lower in the month. The contribution of the yield spread component of the LEI also turned negative in the last two months, which is often a signal of recession to come. While the LEI continues to signal recession in the near term, indicators related to the labor market—including employment and personal income—remain robust so far.
Think you have problems? Lenders and vendors aren’t the only ones who had a bad 2022. Redfin, owner of Bay Equity Home Loans, lost $320 million last year. (This is after a $57 million gain from buying back senior notes, so some would say Redfin really lost $377 million.)
Common Sources and influences
- Brian Levy
- Daily NMP from ambizmedia
- The National Real Estate Post
- George Meillarec @ Loop Capital (often via Bloomberg)
- Bank of Oklahoma MBS traders, Chris Maloney
- MCT Daily Market Commentary