Published Date 5/27/2022
Prior to the 8:30 am ET data the 10 yr. was unchanged from yesterday and MBS prices also unchanged. All week we pointed to this morning’s release of April personal income, personal spending, PCE. Personal income expected +0.6%, increased 0.4%, personal spending expected +1.4%, increased 0.9%. The personal consumption expenditures (PCE) up 0.2% on estimates of +0.2% and down from 0.9% in March, yr./yr. +6.3% as expected but down from 6.6% in March. Core PCE (ex food and energy) expected +0.3% was +0.3%, yr./yr. +4.9% as expected but down from 5.2% in March. Overall, the inflation data was as expected, still increasing a little but less than earlier this year. There was very little reaction to the anticipated report. The 10 yr. at 9 am 2.75% unch, FNMA 4.5 30 yr. coupon +6 bps from yesterday’s close. U.S. inflation-adjusted consumer spending rose in April by the most in three months; purchases of goods and services, adjusted for changes in prices, increased 0.7% from March, Commerce Department data showed. Household purchases are nonetheless at risk of moderating as gas prices are now back at record highs and grocery bills take a bigger toll on budgets. The strain was evident in a drop in the April savings rate to the lowest level since 2008, as well as a pickup in consumer borrowing.
At 9:30 am the DJIA opened +61, NASDAQ +159, S&P +33. 10 yr. at 9:30 am 2.73% -2 bps FNMA 4.5 30 yr. coupon +17 bps and +9 bps from 9:30 am yesterday.
At 10 am the U. of Michigan consumer sentiment index, expected at 59.1, the same as mid-month after falling from 65.7 in March. The index fell again to 58.4 the lowest since 2011. The drop was largely driven by continued negative views on current buying conditions for houses and durables, as well as consumers’ outlook for the economy, primarily due to concerns over inflation. At the same time, consumers expressed less pessimism over prospects for their personal finances than over future business conditions. The gauge for current conditions fell to 63.3 from a preliminary of 63.6 and the expectations subindex declined to 55.2 from 56.3 in the first estimate. Meanwhile, inflation expectations for the year ahead dropped to 5.3% from 5.4% but the 5-year outlook was unchanged at 3%.
Heading into a long weekend, Memorial Day, the bond and mortgage markets will close at 2 pm EDT today and the markets will be closed on Monday. Usually going into a long weekend interest rate markets trade quietly. No more data today, should be quiet. Stock indexes doing better so far this morning but also likely to have a peaceful day. The inflation data this morning adds a little credence to the growing idea that interest rates are moderating. Rates are doing better on the hope that the Fed will stop raising their core interest rate after July’s FOMC.
Source: TBWS
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