Friday, March 26, 2021

Daily Market Report 3/26/21 The Fed's favorite gauge for inflation was released today.  The PCE (Personal Consumption Expenditure) went up 0.2% in February, as it's YoY rose from 1.5% to 1.6%; however, it's Core PCE (excluding the volatile food and energy) rose only 0.1% in February and it's YoY dropped from 1.5% to 1.4%.  The Core PCE is what the Fed terms "Real Inflation" and likes to keep it around 2.0%.  As it appears, we still have room before we reach that level, even though the Markets are anticipating much higher levels.  Another report that was released was Personal Income, which dropped 7.1% in February; and Consumer Spending dropped 1.0%.  Lastly, Consumer Sentiment rose from 83.0 in February to 84.9 in March.  Stocks are in Positive Territory on the low inflation data and higher Consumer Sentiment, but also on good economic data out of Europe and potentially faster vaccinations in the US.  The good economic data in Europe dragged MBS down, as the US Markets opened, but has pulled itself closer to Unchanged levels.  It's currently Down 3bps; however, yesterday, the Market closed in Negative Territory (down about 6-8bps).  This will most likely lead Lenders to price in their rate sheets a bit worse (compared to yesterday's) this morning.  But it's possible that MBS continues some improvement (hence, maybe some Lender repricing for better to the rate sheets).  Meanwhile, Yields spiked to 1.67% early on, but have subsided down to 1.64% level.  Yesterday, it broke back above the 1.62% level again, which is what's putting the pressure on MBS.

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