MBS down 9 bps. Stocks flat.
With the global financial market finally out of holiday weekend mode, US bond trading hasn’t found any new inspiration for better or worse. Trading was almost perfectly flat in Asia and generally flat in Europe where modest gains and losses cancelled each other out by the start of US trading.
A few Fed speakers are scheduled in the PM hours and NY Fed’s Williams was out moments ago saying logical things:
FED’S WILLIAMS: INFLATION STILL WAY ABOVE OUR 2% GOAL
FED’S WILLIAMS: SEEING IT COMING DOWN MOSTLY IN GOODS AND COMMODITIES
FED’S WILLIAMS: SOME CORE SERVICES INFLATION EX HOUSING HASN’T BUDGED YET SO WE HAVE OUR WORK CUT OUT FOR US
FED’S WILLIAMS: ONE MORE RATE HIKE IS A REASONABLE STARTING PLACE BUT WE WILL BE DRIVEN BY THE DATA
FED’S WILLIAMS: WE NEED TO STAY IN DATA DEPENDENT MODE
FED’S WILLIAMS: IF INFLATION COMES DOWN, WE WILL HAVE TO LOWER RATES
Small Business Optimism fell again in March, according to the NFIB Small Business Optimism Survey. Small business owners are hunkering down for a recession, and are generally dour about future sales and earnings. Prices are still elevated, but it looks like things continue to work back towards historical averages.
Rate lock volume increased 43% in March, according to Black Knight. Purchase lock volumes rose 44%, which is well above the normal Spring Selling Season bump of 30%.
CarMax reported that 17% of montly car payments are now over $1000 per month! Up from 6% 2 yrs ago.
Tomorrow’s CPI report is going to be hugely important. The Fed is going to hang their hat on this data when they meet the first week of May. Market is expecting a sharp fall from 6% to 5.2% – with core to increase from 5.5% to 5.6%. My prediction? Volatility.
Wednesday morning brings the most consequential economic data of the next several weeks in the form of the Consumer Price Index (CPI) for the month of March. Bond yields spent today moving back toward the middle of their recent range, perhaps to be in a more nimble position to digest the inflation data. The report easily has the power to challenge either side of that range, but it would only use that power if it comes in far enough above or below the forecast. For the record, the line item that matters is CORE MONTH-OVER-MONTH CPI, but some market participants will dig even deeper into that number to track core “services” prices, which are currently taking all the blame for inflation’s persistence.
Net production income for independent mortgage bankers fell to a $301 loss (13 basis points) for all of 2022,
The Federal Home Loan Bank system reported a large decline of about 88% in its debt issuance in the last week in March ($37Bn), compared to the $304Bn issued two weeks earlier. This decline indicates fewer deposits are being withdrawn from banks, a sign that individual and regional banks are stabilizing after the turmoil caused by the failure of Silicon Valley Bank, Signature Bank, and Silvergate Capital.