Charts We're Watching
Last week, the UMBS 3.50 Coupon opened Monday at 102-17 and closed Friday after a wild ride at 102-28. It rallied Monday on the overnight news of Europe’s largest nuclear plant on fire, fell back Wednesday after Powell’s remarks that they are moving forward with raising short term rates, then rallied again to close the week on news from Ukraine.
At the start of this week, March 7, we are a bit off. Strong US economic numbers continue to come out including payroll numbers on Friday adding 678k jobs in February, the strongest number since July, and revisions in the prior two months adding nearly +100k. Labor force participation ticked up to 62.3%, and the unemployment rate fell to 3.8%. This was the last employment report before the Federal Reserve meets to discuss rate hikes and balance-sheet normalization. It likely provides further support that the economy is strong enough to absorb at least one hike in March and further hikes into 2022 and 2023. Fed Chair Powell indicated that a 25bps hike will be the most likely outcome for the March meeting, but the Russian/Ukraine conflict does play a role in the Fed's future forecasts. This push-and-pull between high inflation in the US and the war in Ukraine is most of what is causing these big swings in the MBS market and also varied results in the stock, energy and global markets. Focus of this week will be on Thursday’s CPI report (see calendar below).
This week starts with the 10-Year Treasury at 1.755% and UMBS 30-Year 3.50 Coupon at 102-23+.
Click here for the full economic Calendar