MBS down 14 bps on the day. Stocks up 24 points

Friday started with a noticeable increase in market activity and interest due to the release of important economic data. The Canadian employment report showed a negative reading, which was

unexpected and marked a significant deviation from the post-COVID labor market trend. This event, combined with recent market movements related to the Bank of Canada, indicates a potential shift in inflationary forces and highlights the market’s focus on any potential indicators before the upcoming Fed/CPI week. Despite an initial rally, US bonds quickly retreated to their earlier weaker levels, reflecting a somewhat dismissive attitude towards the impact of the Canadian report.

Housing affordability improved in the first quarter of 2023, however affordability issues remain, according to the NAHB. This was driven by wage growth, with flattish home price growth and a decline in mortgage rates. Given the shortage of skilled labor and cost of building materials, new construction will have a limited effect on affordability, which means that wage growth will have to do the heavy lifting here.

The Atlanta Fed’s GDP Now Index sees 2.2% growth in Q2. This is surprising given that the ISM data has been pretty weak for manufacturing and the services economy seems to be decelerating as well. Global growth has been downgraded by the IMF, and China is struggling with deflation.

Tesla Inc. shares jumped 6% in pre-market trading and was on track to rise for an 11th straight session as General Motors Co. announced it’s joining the company’s charging network. GM advanced 4.3%. DocuSign Inc. rose 5.3% after the e-signature software company posted an earnings beat and raised its full-year forecast.

The day began with a hunt for the mystery market mover behind the 8:30am spike in Treasury yields.  Once it was revealed to be Canada’s jobs report, US traders could only laugh as the two Canadian events that had a visible impact on the US bond market this decade happened only 2 days apart, and all on a week with Canadian wildfires already very much in focus in New York. While it’s true these events mattered on this week’s small scale, the market is infinitely more interested in next week’s CPI and Fed Announcement.

MBS closed out down 5 bps at 99.98.   Stocks were up 5 points

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