http://MikesDailyMarketReport.com: There's a lot of important Economic Data being released today, which I'll touch on some of it after I list the reported data. Employment Costs (initial) rose 1.4% for Q1. Personal Income rose 0.5% in March while Consumer Spending rose 1.1%. The Personal Consumption Expenditure (PCE) rose 0.9% in March, as it's YoY rose from 6.4% to 6.6%. However, it's Core PCE (excludes food and energy) rose 0.3% as it's YoY dropped from 5.4% to 5.2%. This is the Fed's favorite gauge for inflation! The Chicago PMI, which measures the manufacturing activity in the Chicago area, dropped from 62.9 in March to 56.4 in April. Lastly, Consumer Sentiment dipped by 0.5 to 65.2 in April. MBS dropped to it's lowest levels right after the PCE data was released. Investors were concerned over the 0.9% headline number and the persistent rise in Employment Costs (especially related to wages). Those both are very inflationary! The Market pulled back from it's lows once the Consumer Sentiment was released; however, the Market shifted a bit again (a little worse). MBS is currently Down 39bps as Mortgage Rates have worse pricing than yesterday. The Market did improve a bit yesterday, which it closed Up 3bps, after being Down around 30bps and hanging around -13bps for most of day. We did get some price improvement yesterday. Today's pricing, however, worsened from yesterday's (better) pricing. Yields continue to climb; and are now around 2.89%. Now the Markets will be positioning itself ahead of next week's FOMC, which we're expecting an announcement of 0.5% rate hike and reduction of Balance sheet. This will definitely be a Market Mover; but, the Markets have expected this to come for some time and probably have built those scenarios into the Market's pricing. Stay tuned!
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