The Latest on Consumer Sentiment Due Today

  • Markets are opening with a modest risk-on tone as regional bank stocks are finding some early bids, but we’ll see  how long that lasts as the list of headwinds facing banks in general and regional banks specifically are numerous. The last of this week’s economic releases will be headlined by the University of Michigan Consumer Sentiment Survey at 10am ET which may reveal some insight into how the consumer is dealing with the banking crisis and related credit tightening.  Currently, the 10yr is yielding 3.40%, while the 2yr is at 3.98%.


  • The second meeting of congressional leaders and President Biden scheduled for today was postponed until next week. That is supposedly a good thing as staff will be working over the weekend to hammer out areas of agreement. We think with June nearly three weeks away, which is the earliest estimated x-date, we could be in store for more posturing before an eventual agreement is reached. It seems the way for these things.


  • Fed Governor Bowman in a speech earlier this morning in Frankfurt, Germany said, “Should inflation remain high and the labor market remain tight, additional monetary policy tightening will likely be appropriate to attain a sufficiently restrictive stance of monetary policy.” Bowman is regarded as a relative centrist member, and with NY Fed President Williams’s comments earlier this week that also stressed data dependence, the Fed speak continues to suggest any pause should not be confused with a pivot. The Fed speak today is limited to a commencement address and then Bullard and Fed Governor Ferguson take part in a panel discussion, but that occurs at 7:45pm ET so any market reaction will have to wait until next week.


  • Import and export prices for April were released this morning and the results continue a theme of disinflation, if not outright deflation, for this price series. On a YoY basis, imports have now declined 4.8% for the second month in a row while export prices YoY have declined 5.9%, which is a new cycle low.


  • At 10am ET we’ll get our first look at the University of Michigan Consumer Sentiment Survey for May. While the headline sentiment reading has paused a bit since the regional banking crisis erupted, it remains well off its all-time low that was reached in June. In addition to overall sentiment, inflation expectations will get some attention. Last month the year-ahead inflation expectation spiked to a five-month high of 4.6%. This index is closely aligned with the movement in gas prices which have pulled back from the Mid-April peaks, but still remain lofty at >$3.50/gallon. Additionally, 5-10 year inflation expectations will be closely monitored after it rose to 3% in April following four consecutive reads at 2.9%. Certainly the recent inflation data has shown some evidence of cooling price pressures but this household inflation survey will be closely monitored by the Fed, as well-anchored inflation expectations are a core part of their inflation objectives.

Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 4.80 4.57 4.54 4.56 4.82 5.28
0.50 4.79 4.54 4.48 4.45 4.68 5.17
1.00 4.78 4.51 4.44 4.40 4.59 5.04
2.00 4.50 4.39 4.32 4.47 NA
3.00 4.28 4.41 NA
4.00 4.36 NA
5.00 4.33 NA
10.00 NA

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Published: 05/12/23 Author: Thomas R. Fitzgerald