Morning Report: Another good inflation report

Vital Statistics:

Stocks are lower this morning on no real news. Bonds and MBS are up on the PPI data. The Bank of England hiked by 25 bp this morning.

Inflation at the wholesale level came in at 0.2% month-over-month and increased 2.3% on a year-over-year basis. Ex-food and energy, prices rose 0.2% MOM and 3.4% YOY. These numbers were below expectations, and bonds are rallying on the news.

Initial Jobless Claims rose to 264k last week. You can see in the chart below that the claims are on the way up, after a long period at 50 year lows.

The Fed Funds futures have taken further rate hikes off the table, and are handicapping a roughly 50% chance of a 25 basis point cut at the July meeting.

The FHFA has announced it will rescind the upfront fees based on borrowers’ DTI. “I appreciate the feedback FHFA has received from the mortgage industry and other market participants about the challenges of implementing the DTI ratio-based fee,” said Director Sandra L. Thompson. “To continue this valuable dialogue, FHFA will provide additional transparency on the process for setting the Enterprises’ single-family guarantee fees and will request public input on this issue.”

United Wholesale reported first quarter volume of $22.3 billion, which was a 11% decline from the fourth quarter and 43% decline from a year ago. Gain on sale rebounded to 92 bps from 51 in the fourth quarter. They were still down from 99 bp a year ago. The company forecasts Q2 volume between $23 and $30 billion, with gain on sale margins from 75 to 100 bps.

Western Alliance gave an update on its deposit situation. Total deposits were 49.4 billion, up $1.8 billion from the end of last quarter and up $600 million from last week. Insured deposits are 79% and liquidity covers uninsured deposits by 2x.

PacWest said that deposits fell by 9.5% in the week ended May 5. Available liquidity is about 3x the level of uninsured deposits. The regional banks continue to be under pressure overall, as the S&P SPDR regional bank ETF is down 38% YTD.

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Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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