Weekly Market Snapshot for January 10, 2017
Market Indicators
Benchmark FN30 Current Cpn FN30 3.5 Current GN230 3.5 Current FN15 3.0 Current 10Yr. Yield
One Week Ago 3.120 102 11/32 103 28/32 102 17/32 2.448
Current 3.070 102 22/32 103 25/32 102 28/32 2.381
Delta -0.050 + 11/32 - 04/32 + 11/32 -0.067
Current Prices/Yields as of 3:00pm EST on 1/10/17
 
Market Update
Friday's Non-farm number (+156k) came in slightly below estimates (+175k), while the prior month print was revised up by 19k. On it's own, this is a fairly benign report, but overshadowing this piece of the US unemployment Report was another, often overlooked component of the report, Average hourly wages, which jumped 2.9 annualized. It's been so long since wages have increased that the markets have all but dismissed this piece of the labor report, but it's also the piece that needed to move for market watchers to agree that the labor market was finally healthy. Since we began digging out of the 2007 financial crisis, the headline Unemployment rate has certainly drifted lower, and the Non-farm payrolls prints have been consistently positive, but there has been little evidence that all of this was actually leading to better wages, and thus inflation pressure. This is one of the main reasons that the Fed has been hesitant in raising rates and putting final closure to QE-related open market activities. Please note that this is an example from a single report, and it does not incite a trend. That is undoubtedly the reason it did not lead to a larger downdraft in bond prices, but be assured that the Jan Unemployment will be watched closely for a trend to develop in this wage component. A further development of a wage spike would almost certainly give the Fed reason to be more hawkish. Elsewhere in the world of market movers, Treasury auctions and Fedspeak this week may take a larger stage given the slight change in investor focus mentioned above, so watch for developments there.
 
Light Reading
Quick run-down of the Dec US Unemployment Report
Nonfarm payrolls add 156K in Dec, vs 178K expected; unemployment rate at 4.7%, in line
 
Economic Calendar

Data/Events

When Time (ET) Release Actual Consensus Estimate Prior
1/9/17 3:00 PM Consumer Credit $24.6B $18.0B $16.2B
1/10/17 10:00 AM JOLTS - Job Openings 5.522M NA 5.451M
1/10/17 10:00 AM Wholesale Inventories 0.01 0.90% -0.10%
1/11/17 7:00 AM MBA Mortgage Applications Index 0 NA 0.001
1/11/17 10:30 AM Crude Inventories 0 NA -7.100M
1/12/17 8:30 AM Export Prices ex-ag. 0 NA 0.20%
1/12/17 8:30 AM Import Prices ex-oil 0 NA -0.10%
1/12/17 8:30 AM Initial Claims 0 255K 235K
1/12/17 8:30 AM Continuing Claims 0 NA 2112K
1/12/17 10:30 AM Natural Gas Inventories 0 NA -49 bcf
1/12/17 2:00 PM Treasury Budget 0 NA -$14.4B
1/13/17 8:30 AM PPI 0 0.30% 0.40%
1/13/17 8:30 AM Core PPI 0 0.10% 0.40%
1/13/17 8:30 AM Retail Sales 0 0.70% 0.10%
1/13/17 8:30 AM Retail Sales ex-auto 0 0.60% 0.20%
1/13/17 10:00 AM Business Inventories 0 0.60% -0.20%
1/13/17 10:00 AM Mich Sentiment 0 98.5 98.2
1/17/17 8:30 AM Empire Manufacturing 0 NA 9
1/18/17 7:00 AM MBA Mortgage Applications Index 0 NA NA
1/18/17 8:30 AM CPI 0 NA 0.20%
1/18/17 8:30 AM Core CPI 0 NA 0.20%
1/18/17 9:15 AM Industrial Production 0 NA -0.40%
1/18/17 9:15 AM Capacity Utilization 0 NA 0.75
1/18/17 10:00 AM NAHB Housing Market Index 0 NA 70
1/18/17 2:00 PM Fed's Beige Book 0 NA NA
1/18/17 4:00 PM Net Long-Term TIC Flows 0 NA $9.4B
1/19/17 8:30 AM Initial Claims 0 NA NA
1/19/17 8:30 AM Continuing Claims 0 NA NA
1/19/17 8:30 AM Housing Starts 0 NA 1090K
1/19/17 8:30 AM Building Permits 0 NA 1201K
1/19/17 8:30 AM Philadelphia Fed 0 NA 21.5
1/19/17 10:30 AM Natural Gas Inventories 0 NA NA
1/19/17 11:00 AM Crude Inventories 0 NA NA
*All times Eastern
 
MBS Graphs
FNMA 30 3.5 - 1 Week

US Treasury 10yr Yield - 1 year

 
Weekly Optimal Blue Tech Tip

Did you know...
If ever have loans in your Shock Analysis that are being grouped into illiquid coupons, you can influence the coupon slotting by adding Coupon Drops in the Admin Tab. Select any investor that is active for your shock, select the appropriate security from the “Instrument Type” drop down, then enter a positive bps amount in the “Lender Drop” field next to the offending coupon. This will place a “drop” in execution price in that coupon so loans will then group in the next best coupon.


Best Efforts - Mandatory Spread Index
  Conventional Government
  Week Average QTD Week Average QTD
Median - .125 0.18 0.18 0.17 0.17
Median 0.16 0.16 0.14 0.14
Median + .125 0.14 0.14 0.08 0.08
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