The focus this week will be on inflation data and Treasury auctions

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Published Date 4/24/2023

The 10 year note began today down 4 bps at 3.53% after testing its upside support at 3.60% on Friday (close 3.58%); MBS prices generally unchanged.

There are no economic reports today, no Fed speakers this week. The key data doesn’t hit until Friday when the March PCE inflation data is reported (the Fed’s favorite). The report comes three days prior to the FOMC meeting on May 3rd.

Bloomberg reporting this morning that highly leveraged hedge funds are betting on higher Treasury yields in a market that’s divided over whether the US economy can avoid recession and Federal Reserve interest-rate cuts. Next Wednesday the FOMC is expected to increase the FF rate by 25 bps then pause, possibly through the end of the year. The funds increased short positions to 1.29 million contracts as of April 18th (data from the CFTC). It was the fifth straight week that net shorts had increased. The swap markets continue to bet 100% that the Fed will increase next week. Then there is that constant other side, wagering on recession and the Fed back-peddling. Over the last six weeks the bellwether 10 year note has traded flat, in a 20 bp range from 3.405 to 3.60%. The 10-year Treasury yield has advanced six basis points this month to 3.53%, unwinding some of March’s 45-basis-point drop.

At 9:30 am the DJIA opened +7, NASDAQ -17, S&P unchanged. The 10 year note -4 bps to 3.54% after increasing 4 bps last Friday. FNMA 6.0 30 year coupon +2 bps and -7 bp from 9:30 am Friday.

The US dollar is losing its strength on bets the Fed will launch into an easing cycle later this year. Investors may swing to the Yuan and yen as currencies rotate. Just a thought, but if the dollar weakens as increasing beliefs suggest gold will climb.

Nothing has changed, it’s a coin flip in markets whether the Fed will keep going, pause, or quit. It is as certain as can be with the Fed, a 25 bp increase next week. The key next week is the policy statement and Powell’s press conference. There are some interesting data points this week and Treasury will auction 2s, 5s, and 7s; the key data isn’t until Friday however. Earnings season continues to dominate near term equity markets.

This Week’s Economic Calendar:

Monday,

No data

Tuesday,

9 am Feb Case/Shiller home price index (-0.4%, year/year 0.0%)

10 am April consumer confidence index (104.2 unch from March)

March new home sales (635K from 640K)

1 pm 2 year note auction

Wednesday,

7 am weekly MBA mortgage apps

8:30 am March durable goods orders (+0.9%, ex transportation -0.2%, core +0.2%)

March US trade deficit (-$90.0B)

1 pm 5 year note auction

Thursday,

8:30 am weekly jobless claims (249K from 245K)

Q1 advance GDP (2.0% from 2.6% in Q4)

10 am March pending home sales (+0.4% from +0.8% in Feb)

1 pm 7 year note auction

Friday,

8:30 am March personal income +0.2%, personal spending 0.0%)

March PCE m/m +0.1%, year/year +4.2% from 5.0%; core m/m +0.3%, year/year +4.5% from 4.6%)

Q1 employment cost index (+1.0%)

9:45 am April Chicago purchasing mgrs. index (43.5 from 43.8)

10 am final April U. of Michigan consumer sentiment index (63.5 unch from mid-month)

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.