Morning Commentary – 03/27/2023

Published Mar 27, 2023

Daily Market Report

Good morning!  Markets managed to shrug off the Deutsche Bank headlines on Friday, reversing the flight to quality flows by mid-morning.  The balance of the session was fairly quiet by recent standards and investors actually added a little risk heading into the weekend as evidenced by modest stock market gains.  Despite the more balanced flows, the average 30yr mortgage rate ticked lower by several basis points to 6.38%.

Treasuries are starting off this week under some pressure as equity futures look to add to Friday’s gains.  With no worrisome headlines popping up over the weekend, investors seem willing to increase their risk appetite.  Yields are higher across the curve with the 10yr up 9 basis points and 2s higher by just over 17 basis points.  Supply in the form of a $42bn 2yr auction is adding to the headwinds at the shorter end of the curve.  Expect rate sheet pricing to come in worse versus Friday as a result.  Today’ economic calendar will have limited impact on price action.  With the market stabilizing, fed funds futures have begun increasing the odds of another 25 basis point hike at the May FOMC meeting though there remains a 65% percent likelihood they pause.  The aggregate impact of policy tightening has yet to fully take effect, so we should not be surprised to see further headlines reflecting instability in the financial sector over the coming weeks.  Volatility is likely to remain thematic.  Have a great Monday, everyone!


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