UMBS down 8 bps on the open. S&P futures opened up 37.5

The Fed will be meeting Tuesday and Wednesday and will announce its latest interest rate decision Wednesday. With markets widely expecting the central bank to leave rates unchanged. Market participants are hopeful that the Fed will provide additional clues about monetary policy, specifically rate cut timing and frequency.

Recent inflation data shows that inflation remains persistent, reducing the likelihood of rate cuts in the short run. Traders are now pricing in roughly a 58% chance of rates cut in June.

For all that we’ve talked about the 4.32% technical level and considering yields hit the 3pm close at 4.338, one might expect today to have been important, interesting, or eventful.  In truth, it was none of those things as this magnitude of breakout is well within the margin of error typically applied to broad technical targets. Even then, what would a breakout really mean if we’re still waiting for Wednesday’s Fed events to confirm or reject a breakout?  In other words, Monday can’t be anything other than a placeholder.

UMBS closed the day down 9 bps at 100.31