Inflation is back in focus for the week ahead

___

Published Date 4/10/2023

Last Friday the March employment data showed more signs the labor market is cooling. This morning in early trading the 10 year note yield started down 4 bps after increasing 11 bps Friday. Friday the bond market had a short day, closing at 12 pm ET while the stock market was closed all day. NFP jobs expected at 240K, reported +236K. Feb jobs revised from 311K to 326K. Private jobs expected 233k, declined to 189K. Average hourly earnings +0.3% as expected, year/year expected at 4.3% reported +4.2% and well below 4.6% in Feb. The labor participation rate 62.6%, increased from 62.5% in Feb.

Inflation continues, Wednesday march CPI and Thursday March PPI. The markets remain divided about what the Fed will do on May 3rd when the FOMC meets. The employment market is slowing, recent reports like weekly claims increasing, JOLTS job openings declined, economic conditions are showing the economic outlook is weakening. Most of the stock experts and economic prognosticators are sounding increasingly bearish and betting a recession is likely. The caveats, always added to recession remarkets, any recession won’t last long and won’t be severe. “The market is extremely illiquid. What this reminds me of is the 2008-09 illiquidity in the bond markets. It’s kind of similar. You cannot afford to get stuck with a bad position,” said Vineer Bhansali, founder of LongTail Alpha LLC and the former head of analytics for portfolio management at Pacific Investment Management Co. “The Treasury market is a roach motel right now. You can get in but you can’t get out. So be very careful.”

Thin trading to begin the day, key global markets closed for Easter holidays; Europe, Hong Kong, Australia all closed.

At 9:30 am the DJIA opened -100, NASDAQ -112, S&P -26. 10 year at 9:30 am 3.40% -1 bp. FNMA 5.5 30 year coupon +5 bps and -20 bps from 9:30 am Friday; 6.0 coupon +3 bps and -19 bps from 9:30 am Friday. By 10 am MBS prices were down 9 bps on the day.

When the SVB crashed the 2 year note yield was at 5.00%, now 3.98%. A mad rush for safety, the last week it has settled as no more banks have hit the wall, the initial panic is over. Now its what the Fed may, or may not do, in three weeks. Presently, and for the next three days, inflation will drive trades: CPI and PPI Wednesday and Thursday.

This Week’s Economic Calendar:

Monday,

10 am Feb wholesale inventories (+0.2%, as reported +0.1%)

Tuesday,

6 am NFIB small business optimism (89.0 from 90.9)

1 pm 3 year note auction

Wednesday,

7 am weekly MBA mortgage applications

8:30 am March CPI (+0.3% m/m, year/+5.2% from 6.0%; ex food and energy +0.4% m/m from +0.5%; year/year +5.6% from 5.5%)

1 pm 10 year note auction

2 pm FOMC minutes from the March meeting

March Treasury budget (-$253B)

Thursday,

8:30 am weekly jobless claims (233K from 228K)

March PPI (0.00% from -0.1% m/m; ex food and energy +0.3% from 0.0%)

1 pm 30 year bond auction

Friday,

8:30 am March retail sales (-0.4% m/m from -0.4% in Feb, ex vehicles m/m -0.4% from -0.1%)

March import and export prices (imp[orts -0.2% from -0.1% m/m; exports -0.2% m/m from +0.2%)

9:15 am March industrial production and capacity utilization ( production +0.3% from 0.0%, cap utilization 78.8% from 78.0%)

10 am U. of Michigan mid-month sentiment index (62.7 from 62.0)

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

Guardian Mortgage, a division of Sunflower Bank, N.A.