Vital Statistics:
| Last | Change | |
| S&P futures | 4,140 | -19.0 |
| Oil (WTI) | 77.79 | -0.93 |
| 10 year government bond yield | 3.43% | |
| 30 year fixed rate mortgage | 6.46% |
Stocks are lower this morning as tech earnings continue to come in. Bonds and MBS are up.
Consumer confidence fell in April, according to the Conference Board. “While consumers’ relatively favorable assessment of the current business environment improved somewhat in April, their expectations fell and remain below the level which often signals a recession looming in the short-term,” said Ataman Ozyildirim, Senior Director, Economics at The Conference Board. “Consumers became more pessimistic about the outlook for both business conditions and labor markets. Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months. They also expect fewer jobs to be available over the short term. April’s decline in consumer confidence reflects particular deterioration in expectations for consumers under 55 years of age and for households earning $50,000 and over.”
New Home Sales rose 9.6% MOM in March but were down 3.4% compared to a year ago. The median new home price was $449,800 which was up about 3% compared to a year ago.
House prices rose 0.5% MOM and 4% on a YOY basis according to the FHFA House Price Index. “U.S. house prices increased slightly in February,” said Dr. Nataliya Polkovnichenko, Supervisory Economist, in FHFA’s Division of Research and Statistics. “This increase was, in part, due to a decline in mortgage rates by more than half a percentage point from the peak reached in early November as well as historically low housing inventory.”
The Case-Shiller Home Price Index reported a 0.2% MOM gain in February, and a 2.0% annual increase. “The results released today pre-date the disruptions in the commercial banking industry which began in early March. Although forecasts are mixed, so far the Federal Reserve seems focused on its inflation-reduction targets, which suggests that interest rates may remain elevated, at least in the near-term. Mortgage financing and the prospect of economic weakness are therefore likely to remain a headwind for housing prices for at least the next several months.”
First Republic Bank is down about 30% this morning after disclosing that $70 billion in deposits fled the bank during the first quarter. This was a 35% drop. The bank has suspended its dividend on its common and preferred stock and is taking steps to reduce expenses.
Agency mortgage REIT AGNC Investment reported first quarter earnings yesterday. MBS spreads widened a touch compared to the end of 2022, however they remain tighter than the end of Q3 2022, which represented the widest since the 2008 financial crisis. Tangible Book Value per share fell from $9.84 to $9.41.
AGNC so far has managed to maintain its monthly $0.12 dividend while just about every other mREIT has been forced to cut theirs. Even if the Fed doesn’t pause next month, mortgage rates still can have some downside from tightening MBS spreads. Lower fixed income volatility will help things a lot.
The Daily Tearsheet 