MBS down 15 bps on the open. 10y up 5 bps.

Federal Reserve Chair Jerome Powell and his colleagues confront a “legitimate head scratcher” as they probe how high to raise interest rates in the coming months: Why is

wage growth slowing if the jobs market is so tight?

The answer will go a long way in determining whether the Fed can bring down inflation without doing that much damage to employment and the economy. If pressure on pay keeps easing even as employers keep hiring, policy makers may feel less compelled to push rates ever deeper into restrictive territory in their drive to return inflation to their 2% goal.

ISM PMI Manufacturing Index came in at 47.7 vs est 48. Was 47.4 previously. New orders rose to 47 vs 42.5. Production fell to 47.3 vs 48. Employment fell to 49.1 vs 50.6.

Tomorrow marks the end of the COVID era food stamp program. Which will impact about 32m people at a time when food prices are very high. The benefit of $251 per month will shrink to $81. Sad and helps lower inflation.

Biden administration plan to forgive student loans is not doing well in the Supreme Court.

The yield curve continues to invert, with the 10s-2s spread at -89 basis points. The last time we were at these levels was during the Volcker tightening regime during the early 1980s.

It was a wonderful three months for the US MBS index while it lasted. February’s performance of -0.29% in excess return brought an end to a three-month long period that was the best in the history of the index. From November through January the index excess return came to +2.30%, easily lapping the previous record of +1.77% in excess return seen from October through December 2010. Markets don’t move in a straight line, so February is nothing to panic about; just tip your cap to a great performance streak come to an end and move on. Things like that don’t happen too often.

Homebuilder Hovnanaian Enterprises reported a 8.8% decline in revenues and a drop in gross margins, which indicates that it had to use promotional incentives to move the merchandise. The cancellation rate rose to 30%.  Hovnanian is exiting the Minnesota, North Carolina, Tampa and Chicago markets.

Rocket Cos. lost $493 million in the fourth quarter, but management emphasized its long term goals and its recent expense reductions while also hinting at a new credit card product that could help further its lead generation in home loans.

In all of 2022 generated total revenue, net of $5.8 billion, delivered net income of $700 million, generated total adjusted revenue of $4.6 billion and adjusted net loss of $137 million, or an adjusted loss of 7 cents per diluted share. This company generated $133.1 billion in mortgage origination closed loan volume and gain on sale margin of 2.82 percent.

Recall that Rithm Capital (aka Newrezreported earnings: Mortgage origination volume fell 43 percent QOQ and 80 percent YOY to $7.9 billion. The company is guiding for 1Q23 volume to fall further to $5 – 7 billion. On the plus side, gain on sale margins rose 10 bp QOQ and 16 bp YOY to 1.81 percent. Funds available for distribution came in at $0.33, so the $0.25 dividend is well-covered at least for now

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