Published Date 6/17/2022

By the end of the day yesterday the 10 yr. note was down 8 bps and MBS prices down 2 bps; it was another volatile session, MBSs at 9:30 am ET yesterday down 102 bps and the 10 at 3.44%. This morning the 10 started at 3.20% unchanged and MBSs -2 bps on the 5.0 FNMA coupon.

Stocks got hammered yesterday (DJIA -741, NASDAQ -453, S&P -123), this morning in early futures trading the indexes a little better.

The Conference Board has a new survey. More than 60% of CEOs expect a recession in their geographic region in the next 12 to 18 months, according to the survey of 750 CEOs and other C-suite executives released today by the Conference Board, a business research firm. An additional 15% think the region of the world where their company operates is already in a recession. The survey, which is based on data collected in May, was conducted before the Federal Reserve on Wednesday approved its largest interest-rate increase since 1994 and Fed officials said it was becoming more difficult to tame inflation while avoiding a recession. The fallout from Russia’s invasion of Ukraine, supply-chain challenges and Covid-19 lockdowns in China, not to mention rising interest rates, are all “creating some uncertainty in terms of the outlook,” said Paul Knopp, chair and CEO of accounting and advisory firm KPMG U.S.

Jerome Powell in a speech this morning, reiterating the central bank’s commitment to bringing down inflation, saying Friday that it’s essential for the global financial system. “The Federal Reserve’s strong commitment to our price stability mandate contributes to the widespread confidence in the dollar as a store of value. To that end, my colleagues and I are acutely focused on returning inflation to our 2 percent objective,” Powell said in introductory remarks for a Fed-sponsored conference on the global role of the U.S. currency. He also noted coming changes in the global financial system, including the use of digital currencies and payments systems like FedNow, a service expected to come online in 2023.

Fed officials target 2% inflation as healthy for a growing economy and have said they will continue raising rates until prices return to that range. May CPI up 8.6% yr./yr. It will drive interest rates much higher to achieve that target unless the economy drops into a lasting recession that so far isn’t what the consensus is now.

The most recent Atlanta Fed GDPNow released yesterday is still reading a flat Q2 GDP that flies in the face of the consensus.

At 9:15 am May industrial production was expected +0.4% from +1.4% in April, production increased 0.2%. May factory use was expected at 79.2% from 78.9% in April, it increased 79.0%; manufacturing declined 0.1% against estimates of +0.4%.

At 9:30 am the DJIA opened -77, NASDAQ +52, S&P +7. 10 yr. note at 9:30 am 3.22% +2 bps. FNMA 5.0 30 yr. coupon -12 bps and +27 bps from 9:30 am yesterday.

Source: TBWS

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