Treasury prices drifted lower overnight in a follow-through to Friday’s post-jobs activity, but prices are little changed this morning on light volumes.  Asian equity markets posted decent gains today, but European equities and S&P 500 futures are mixed at the moment.  The U.N. Security Council voted unanimously to impose unprecedentedly severe sanctions against North Korea for its recent missile tests, and China’s participation/support in the sanctions will likely ease tensions between the U.S. and China, particularly as it relates to the White House pursuing trade actions against China.  This week’s data calendar is headlined by the July CPI report on Friday, and we will hear from a handful of Fed leaders this week, most notably Vice Chair Bill Dudley on Thursday.

Agency MBS prepayments fell 8% in July, largely in line with expectations and largely attributable to a 10% decline in day count from the prior month.  Fannie Mae 30-year speeds fell 1 CPR (8% m/m) to 11.6 CPR in aggregate, and Fannie 15-year prepays also fell 1 CPR from the prior month to 10.4 CPR in aggregate.  Overall, mortgage prepayments remain very benign, and the prepayment curve is relatively flat (i.e., relatively small increase in prepayment speeds as you move along the coupon stack).  Additionally, turnover-related prepayments remain relatively robust, as evidenced by moderately seasoned 30-year 2.5% pools (close to 100 bps out of the money to refi) averaging 8 CPR in July.

Jason Haley
Managing Director, Investment Management Group

Indicators

Date Time Event Survey Actual Prior Revised
08/07/2017 15:00 Consumer Credit Jun $15.750b $18.410b
08/08/2017 06:00 NFIB Small Business Optimism Jul 103.5 103.6
08/08/2017 10:00 JOLTS Job Openings Jun 5700 5666
08/09/2017 07:00 MBA Mortgage Applications 04-Aug -2.80%
08/09/2017 08:30 Nonfarm Productivity 2Q P 0.70% 0.00%
08/09/2017 08:30 Unit Labor Costs 2Q P 1.10% 2.20%
08/09/2017 10:00 Wholesale Trade Sales MoM Jun 0.00% -0.50%
08/09/2017 10:00 Wholesale Inventories MoM Jun F 0.60% 0.60%
08/10/2017 08:30 Initial Jobless Claims 05-Aug 240k 240k
08/10/2017 08:30 Continuing Claims 29-Jul 1960k 1968k
08/10/2017 08:30 PPI Final Demand MoM Jul 0.10% 0.10%
08/10/2017 08:30 PPI Ex Food and Energy MoM Jul 0.20% 0.10%
08/10/2017 08:30 PPI Ex Food, Energy, Trade MoM Jul 0.20% 0.20%
08/10/2017 08:30 PPI Final Demand YoY Jul 2.20% 2.00%
08/10/2017 08:30 PPI Ex Food and Energy YoY Jul 2.10% 1.90%
08/10/2017 08:30 PPI Ex Food, Energy, Trade YoY Jul 2.00%
08/10/2017 09:45 Bloomberg Consumer Comfort 06-Aug 49.6
08/10/2017 14:00 Monthly Budget Statement Jul -$54.0b -$90.2b
08/11/2017 08:30 CPI MoM Jul 0.20% 0.00%
08/11/2017 08:30 CPI Ex Food and Energy MoM Jul 0.20% 0.10%
08/11/2017 08:30 CPI YoY Jul 1.80% 1.60%
08/11/2017 08:30 CPI Ex Food and Energy YoY Jul 1.70% 1.70%
08/11/2017 08:30 CPI Core Index SA Jul 251.627
08/11/2017 08:30 CPI Index NSA Jul 244.934 244.955
08/11/2017 08:30 Real Avg Weekly Earnings YoY Jul 1.10% 1.20%
08/11/2017 08:30 Real Avg Hourly Earning YoY Jul 0.80% 0.90%