Recap of the week and what's on tap next

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Published Date 3/16/2018

Ahead of next week’s FOMC meeting, there was little change in the bond and mortgage markets today. This morning’s housing starts and permits were weak compared to estimates, but it was all in multi-family starts and permits.

The U. of Michigan consumer sentiment index moved higher to 102.0 with estimates at 99, a 14 year high driven mainly by current conditions. Current conditions strength hints at ongoing gains for both consumer spending and employment, was up nearly 8 points to 122.8 and reflects growing confidence in the lower income bracket. Expectations, which is the other component of the index, is actually down 1.4 points to 90.0 and reflects income doubts among the higher bracket. A significant sign of strength is in inflation expectations which are up 2 tenths to 2.9 percent for the year-ahead outlook though unchanged at 2.5 percent for the 5-year outlook. Yet the year-ahead gain is an important reading and is likely to be taken notice of at next week's FOMC meeting.

Trade concerns and unsettled White House staff were main events this week. Rate markets a fraction better.

No change in the 10 yr as it continues to flatline within its 10 bp six-week range. No movement in MBSs from this morning.

Next week: Nothing on Monday. Tuesday, the FOMC meeting begins. Wednesday, Feb existing home sales, FOMC policy statement, FOMC quarterly estimates on GDP and inflation, and Powell’s press conference. Thursday, Feb leading economic indicators, and the Jan FHFA housing price index. Friday, Feb new home sales, Feb durable goods orders.

This week: The 10 yr note rate at 2.85% was down 4 bps from last Friday; Fannie 4.0 30 yr coupon this week -2 bps in price. The DJIA this week down 389, NASDAQ -79, S&P -35. Gold -$10.00, crude oil +$0.24. Dollar index 90.21 +0.07.

Source: TBWS

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