MBS Highway Daily Updates 05/15/2023
Current position: Floating
Both stocks and mortgage bonds are lower to start the day.
The latest data from Black Knight's Home Equity Trends shows that homeowners have an average of 185,000 in tappable equity, which is equity that you could pull out in a cash-out refinance, in their homes.
University of Michigan Consumer Sentiment
The bond market has responded poorly to the University of Michigan's Consumer Sentiment report, which showed an increase in the 10-year inflation expectation. This metric increased to 3.2% from 3% in the previous report. Overall consumer sentiment fell 9%, and expectations for the economy plunged 23% from the previous month.
Debt Ceiling Talks
Comments from Treasury Secretary Janet Yellen over the weekend gave hope that progress is being made on debt ceiling negotiations, saying, "I'm hopeful. I think the negotiations are very active. I'm told they have found some areas of agreement. With the Treasury currently giving a June 1st deadline when it could fail to meet its obligations, it is critical that an agreement be made to avoid the financial chaos of a default. The president is expected to host top congressional leaders on Tuesday for additional debt ceiling talks.
Empire State Manufacturing Index
The Empire State Manufacturing Survey, which shows the health of the manufacturing sector in the NY region, was reported at -31.8 for the month of May, which was well below expectations of -3.75 and last month's reading of +10.8.
Fed Speakers Bostic, Bowman, and Barkin all spoke over the past few days, with their comments putting fear into the market that there will be another rate hike at the FOMC's June 14th meeting. Bostic said on CNBC this morning that "if there's going to be a bias to action, for me, it would be a bias to increase a little further as opposed to cut." He went on to say that he doesn't see any rate cuts this year, which is at odds with the market. Futures were pricing in nearly a 100% chance of a rate cut for the Fed's September meeting.
Tomorrow: Retail Sales, NAHB Housing Market Index
Wednesday: Mortgage Apps, Housing Starts & Permits, 20-Year Bond Auction
Thursday: Initial Jobless Claims, Existing Home Sales
Mortgage bonds are currently trading in a new range between support at 100.281 and a ceiling at the 50-day moving average. The 10-year is trading in a range between its 50-day and 25-day moving averages. Begin the day floating.