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Prior to the key 8:30 am ET data this morning the 10 year note at 4.66% +2 bps, MBS prices -7 bps. Trading overnight in a very narrow range, from 4.67 to 4.64%.
At 8:30 am weekly jobless claims, 215K expected, as released 207K -5 K from the prior week. After seven weeks of very little movement in claims today’s report is the lowest since February. Continuing claims declined 15K to 1.78 million, the second week in a row continuing claim have fallen. The takeaway, the employment sector is stronger than what was expected.
Q1 GDP advance releases was thought at +2.3% down from 3.4% in Q4, growth was a huge miss at 1.6%. The Atlanta Fed GDPNow that calculates growth based on each key data point that is released estimated Q1 growth at +2.7%. Is the economy slowing, or are there nuances within the data, hard to know but the miss is unusually wide. Inflation appears to be increasing according to the report, jobs continue to hold firm. The focus was on the GDP Price Deflator (inflation), it was up 3.1% versus 1.6% in the fourth quarter. That increased crushed stocks and sent interest rates higher breaking the 10 year tight trading range that had held steady for two weeks.
Jobs holding well, inflation according to the deflator increasing. The immediate reaction pushed traders to advance the potential Fed cut back to December, a month ago the first cut was thought to be coming at the June FOMC meeting. The GDP deflator isn’t where the Fed focuses, it’s the monthly PCE data that data will hit tomorrow, expectations for the March core inflation year/year 2.7% down from 2.8% in February.
At 9:30 am the DJIA opened -504, NASDAQ -345, S&P -66. 10 year at 9:30 am 4.73% +9 bps. FNMA 6.0 30 year coupon at 9:30 am -43 bps from yesterday’s close.
At 1 pm $44B of year notes will be auctioned.
This afternoon treasury will auction $44B of 7 year notes, the 2 and 5 auctions this week were decent but today’s huge miss on GDP growth and the deflator may have a positive impact on the auction. Weekly claims strong, consumer spending according to credit card companies saying spending has been strong, consumer confidence remains firm (tomorrow the University of Michigan consumer sentiment index).
PRICES @ 10:00 AM
10 year note: 4.73% +9 bp
5 year note: 4.75% +9 bp
2 year note: 5.03% +8 bp
30 year bond: 4.84% +7 bp
30 year FNMA 6.0: @9:30 am 99.02 -43 bp (-49 bp from 9:30 am yesterday)
30 year FNMA 6.5: @9:30 am 100.86 -29 bp (-33 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 97.74 -53 bp (-53 bp from 9:30 am yesterday)
Dollar/Yen: 155.65 +0.30 yen
Dollar/Euro: $1.0699 unch
Dollar Index: 105.89 +0.03
Gold: $2,331.40 -$7.00
Bitcoin: 63,421 -537
Crude Oil: $82.32 -$0.49
DJIA: 37,786 -674
NASDAQ: 15,420 -291
S&P 500: 4996 -75
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