Early this morning, the 10 yr. note yield at 1.65% +2 bps from Friday, but by 8:30 am ET, the note dropped back to unchanged at 1.63%. MBS prices started off -14 bps, also bounced back to -2 bps from Friday.
This is employment week; as always, a wide range of speculation will key this week's focus (the present estimates are below).
Berkshire Hathaway held its annual meeting over the weekend. Warren Buffett declared the U.S. economy "red hot." "It's almost a buying frenzy,"…. "People have money in their pocket and they're paying higher prices." As growth roars back and interest rates remain low, many -- including Berkshire -- are raising prices, and there is more inflation "than people would have anticipated six months ago." He lashed out on SPACs, saying Berkshire will not have much luck making deals amid the boom in special purpose acquisition companies that gripped the market over the past year. Buffett said President Joe Biden's proposals for a corporate tax hike would hurt Berkshire shareholders. He added that antitrust laws and tax policy could change things for the company, but new tax laws wouldn't alter its no-dividend policy. Buffett said its earnings are rebounding from the worst effects of the COVID-19 pandemic and that it has extended its aggressive stock repurchases with $6.6B of new buybacks.
The U.S. nonprofit Digital Dollar Project said on Monday it would launch five pilot programs over the next 12 months to test the potential uses of a U.S. central bank digital currency (CBDC), the first effort of its kind in the United States. The aim is to generate data that could help U.S. policymakers develop a digital dollar. "There are conferences and papers coming out every week around the world on CBDCs based on data from other countries," said Christopher Giancarlo, former chair of the Commodity Futures Trading Commission and co-founder of the Digital Dollar Foundation. CBDCs are the digital equivalent of banknotes and coins, giving holders a direct digital claim on the central bank and allowing them to make instant electronic payments. The Fed is working with MIT to build a technology platform for a hypothetical digital dollar.
At 9:30 am ET, the DJIA opened +190, NASDAQ +64, S&P +22. 10
yr. at 9:30 am unchanged at 1.63%. FNMA 2.5 30 yr. coupon at 9:30 am +3 bps from Friday.
At 9:45 am ET, April HIS Market manufacturing index, expected at 61.6, as reported 60.5 from 59.1 in March.
At 10:00 am ET, the April ISM manufacturing index expected at 65; the index fell to 60.7, the lowest since January.
Also, at 10:00 am ET, March construction spending was thought to be +2.0%, as released +0.2%, very disappointing.
Traders and investors pushed interest rates higher since the beginning of Feb (from 1.00% to 1.74%), driven by concerns that inflation would increase. Since the beginning of April, the inflation fears have waned, not completely, but with the 10
yr. now at 1.65%, the present consensus is driven hard by Powell and Yellen that any inflation will be short-lived and not much of an increase. Markets now comfortable with the current level of treasury rates.
This Week’s Calendar:
9:45 April IHS manufacturing PMI (expected at 60.6, as released 60.5)
10:00 am April ISM manufacturing index (expected at 65, as released 60.5)
March construction spending (expected at +2.0%, as released 0.2%)
8:30 March US trade deficit (-$74.0B)
10:00 am March factory orders (+1.3%)
No time April auto sales
7:00 am weekly MBA mortgage apps
8:15 April ADP private jobs (+763K)
9:45 am PMI composite final (62.5, services 63.1)
8:30 am weekly jobless claims (533K from 553K the prior week)
Q1 productivity (+3.7%); unit labor costs (-0.6%)
8:30 am April employment data (unemployment 5.8% from 6.0%; non-farm jobs +938K, private jobs 853K, manufacturing +60K; average hourly earnings+0.1%,
3:00 pm March consumer credit (+$17.7B)
PRICES @ 10:00 AM ET
10 yr. note: 1.60% -2 bp
5 yr. note: 0.84% -1 bp
2 Yr. note: 0.16% unch
30 yr. bond: 2.28% -2 bp
Libor Rates: 1 mo. 0.107%; 3 mo. 0.176%; 6 mo. 0.204%; 1
yr. 0.281% (4/30/21)
30 yr. FNMA 2.0: @9:30 101.00 unch (+8 bp from 9:30 Friday)
30 yr. FNMA 2.5: @9:30 103.78 +11 bp (+11 bp from 9:30 Friday)
30 yr. GNMA 2.5: @9:30 103.69 -6 bp (+21 bp from 9:30 Friday)
Dollar/Yuan: $6.4737 -$0.0008
Dollar/Yen: 109.17 -0.16 yen
Dollar/Euro: $1.2055 +$0.0036
Dollar Index: 91.07 -0.21
Gold: $1789.50 +$21.80
Bitcoin: 57,922 +906
Crude Oil: $64.10 +$0.51
DJIA: 34,147 +281
NASDAQ: 14,017 +54
S&P 500: 4204 +23