UMBS opened Tuesday up 14 bps.  Stock futures flat

US equity futures pointed to a pause for Wall Street’s rally fueled by optimism that the Federal Reserve

will start cutting interest rates this year.

In a week light on data but heavy on Fedspeak, Minneapolis Fed President Neel Kashkari is set to appear Tuesday. Federal Reserve Bank of Richmond President Thomas Barkin said Monday said he expects high interest rates to eventually cool US inflation to the central bank’s 2% target. Saying: : I am optimistic that today’s restrictive level of rates can take the edge off demand in order to bring inflation back to our target

Swaps traders are betting on about 45 basis points of Fed rate cuts by December.

Home prices rose 5.6% year-over-year in March, according to the ICE Home Price Index. Homeowners with mortgages closed out the first quarter of 2024 with just a hair under $17T in home equity – an all-time high. Of that, a record $11T is tappable, meaning available for a homeowner to leverage while retaining a 20% equity cushion in the property. On average, that works out to roughly $206K in tappable equity per mortgage holder.

The Atlanta Fed’s GDP Now Index still sees a robust 3.3% growth rate for Q2.

Bonds improved fairly steadily in the AM hours.  After an initial glut of buying demand in the first hour of trading, there was a linear trend channel to the best level of the day right at noon ET.  After that, a similarly linear trend took bonds back toward (but not into) weaker territory.  None of the above occurred outside a range that we’d consider anything other than uneventful.  Overseas data and trading likely helped play a role in the ebb and flow.  The 3yr Treasury auction didn’t have a big impact, but concession-building for tomorrow’s 10yr auction could have contributed to the afternoon weakness.

UMBS closed the day up 15 bps at 100.21