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


08/07/201715:00Consumer CreditJun$15.750b$18.410b
08/08/201706:00NFIB Small Business OptimismJul103.5103.6
08/08/201710:00JOLTS Job OpeningsJun57005666
08/09/201707:00MBA Mortgage Applications04-Aug-2.80%
08/09/201708:30Nonfarm Productivity2Q P0.70%0.00%
08/09/201708:30Unit Labor Costs2Q P1.10%2.20%
08/09/201710:00Wholesale Trade Sales MoMJun0.00%-0.50%
08/09/201710:00Wholesale Inventories MoMJun F0.60%0.60%
08/10/201708:30Initial Jobless Claims05-Aug240k240k
08/10/201708:30Continuing Claims29-Jul1960k1968k
08/10/201708:30PPI Final Demand MoMJul0.10%0.10%
08/10/201708:30PPI Ex Food and Energy MoMJul0.20%0.10%
08/10/201708:30PPI Ex Food, Energy, Trade MoMJul0.20%0.20%
08/10/201708:30PPI Final Demand YoYJul2.20%2.00%
08/10/201708:30PPI Ex Food and Energy YoYJul2.10%1.90%
08/10/201708:30PPI Ex Food, Energy, Trade YoYJul2.00%
08/10/201709:45Bloomberg Consumer Comfort06-Aug49.6
08/10/201714:00Monthly Budget StatementJul-$54.0b-$90.2b
08/11/201708:30CPI MoMJul0.20%0.00%
08/11/201708:30CPI Ex Food and Energy MoMJul0.20%0.10%
08/11/201708:30CPI YoYJul1.80%1.60%
08/11/201708:30CPI Ex Food and Energy YoYJul1.70%1.70%
08/11/201708:30CPI Core Index SAJul251.627
08/11/201708:30CPI Index NSAJul244.934244.955
08/11/201708:30Real Avg Weekly Earnings YoYJul1.10%1.20%
08/11/201708:30Real Avg Hourly Earning YoYJul0.80%0.90%