4:00 EST – Our benchmark FNMA MBS 6.00 April Coupon is up +17 BPS with 60 minutes left to trade.
Rosie the Riveter: February headline Durable Goods Orders were weaker than expected, down -1.0% vs. est. of +0.6%. Ex Transportation, it was flat at 0.0% vs. est. of 0.2% and Non Defense Capital Goods Ex Aircraft was up 0.2% vs. est. of 0.0%. The S&P Markit Flash PMIs for March had a preliminary reading of 49.3 vs. 47.0 for manufacturing and 53.8 vs. 50.5 for services.
Yellen is Yelling: She summoned the heads of top US financial regulators Friday morning for a previously unscheduled meeting of the Financial Stability Oversight Council which was closed to the public.
The problem with banks is continuing, over-leveraged and poor decisions as interest rates increased catching banks ill-equipped to manage it. Time to slow down and let lenders readjust their assets/liabilities. As the week ends, some beliefs that the Fed should have not raised rates last Wednesday. Rear view mirror syndrome. This week volatile, stocks rebounded amid assurances from authorities about the financial sector and growing speculation that central banks will have to stop raising rates to prevent a recession. Government regulators here and in Europe continue to remind the banking sector is strong. By the end of this week, no rate increases in May here or in Europe. This morning the NY Fed data showed inflation has slowed to the lowest level since 2021.
Mark Haefele, chief investment officer at UBS Wealth Management: “Confidence is fragile, market volatility is likely to stay high, and policymakers may have to go further to make sure faith in the global financial system stays solid,”…. “Financial conditions are also likely to tighten, which increases the risk of a hard landing for the economy, even if central banks ease off on interest-rate hikes.” Jeffrey Gundlach, DoubleLine Capital LP’s co CEO, sees the Fed cutting rates “substantially” soon, according to posts on Twitter. He also warned of “red alert recession signals” emanating from the US yield curve. Pointing to the yield curve as sending recession warnings, the 2 year note/10 year spread three weeks ago was 107 bps to the 10, today the 2 year/10 year spread down to 39 bps as the curve flattens.
Next Week’s Calendar: Monday $42B 2 year auction. Tuesday $43B 5 year auction, Jan Case/Shiller home price index, March consumer confidence index. Wednesday $35b 7 year note auction, weekly MBA mortgage apps, Feb pending home sales. Thursday weekly jobless claims, Q4 final GDP. Friday Feb personal income and spending Feb PCE inflation, March Chicago purchasing mgrs. index, U. of Michigan final March sentiment index.
Everyday this week was volatile in the US financial markets, yet interest rates when you stand back and focus on week/week movements the 10 year note dropped just 3 bps, the 2 year note declined just 6 bps, FNMA 5.5 30 year coupon unchanged on the week. Its good to track week/week movements as its smotth3es the daily whipsaws.
This Week: 10 year note yield at 3.38% -3 bps, 2 year note at 3.77% -6 bps. MBS price for the 5.5 30 year coupon +10 bp. The DJIA once again this week little changed, +376, NASDAQ +293, S&P +54. Key commodities: gold was volatile all week but seen on a week/week comparison down $2.00; crude oil increased $2.98.The dollar declined this week, the index down 0.72, dollar trading this week volatile. Bitcoin increased 89.
PRICES @ 4:00 PM
10 year note: 3.38% -4 bp
5 year note: 3.41% -3 bp
2 year note: 3.77% -6 bp
30 year bond: 3.65% -5 bp
Libor Rates: 1 month 4.845%; 3 month 5.134%; 6 month 5.143%; 1 year 5.107% (3/23/23)
30 year FNMA 6.0: 102.00 -8 bp (-16 bp from 9:30 am)
30 year FNMA 5.5: 101.22 +11 bp (-5 bp from 9:30 am)
30 year GNMA5.5: 101.42 +11 bp (-3 bp from 9:30 am)
Dollar/Yuan: $6.8681 +$0.0482
Dollar/Yen: 130.75 -0.11 yen
Dollar/Euro: $1.0761 -$0.0071
Dollar Index: 103.09 +0.56
Gold: $1980.50 -$15.40
Bitcoin: 27.819 -493
Crude Oil: $69.13 -$0.83
DJIA: 32,237.53 +132.28
NASDAQ: 11,823.96 +36.56
S&P 500: 3970.99 +22.27
SOFR Data 03/24: 30-DAY AVERAGE(%): 4.56815, 90-DAY AVERAGE(%): 4.46787, 180-DAY AVERAGE(%): 4.01871, INDEX: 1.07074564
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