UMBS pushing into the green, up 14 bps, in the first hour of trading.  Wall Street was poised to open steady on Tuesday as traders retreated to the sidelines ahead of results from Nvidia Corp. and speeches by a slew of Federal Reserve policymakers.

The main focus for markets is Wednesday’s results fromartificial-intelligence bellwether Nvidia, which has powered a large chunk of the S&P 500’s recent earnings. Nvidia shares rose 2.5% in New York on Monday, sending the Nasdaq 100 index to another record high.

Cleveland Fed President Loretta Mester has lowered her forecast for rate cuts this year. “I was on the record before saying I was at the median [forecast] which was three. The developments I’ve seen in the economy right now, I would not think that that’s still appropriate,” Mester said in an interview with Bloomberg Television. She added she would be open to a rate hike if needed.

Home prices rose 0.5% month-over-month and 7.3% year-over-year in April, according to Redfin.

Interesting data point on the state of the economy: Inventory is building up at Stellantis and cars that would have sold easily a year ago, now sit unsold and unshipped. Consumers are tapped out, and with 1/3 of car payments above $1,000 a month they are sticking with their old cars for the moment. Inventory build (especially in autos) is sort of an economic canary in the coal mine and if inflation doesn’t start falling, we could see a return to stagflation.

Federal Reserve Governor Christopher Waller indicated that if economic data shows continued softening over the next three to five months, it might prompt the central bank to consider lowering borrowing costs by the end of 2024. Speaking at CNBC and the Peterson Institute for International Economics, Waller emphasized that sufficient positive data, particularly in inflation which needs to show several more months of improvement, could lead to interest rate cuts. He welcomed recent consumer price figures showing progress towards the Fed’s 2% inflation target, but cautioned that the labor market remains robust, suggesting a need to maintain a cautious approach to monetary policy. Waller also noted that current economic conditions do not suggest imminent economic downturns, reinforcing the potential for maintaining current rate levels longer than previously anticipated.

Day 4 of the 11 day weekend is in the books and the bond market did exactly what you’d expect if you were expecting the least interesting outcoming.  Specifically, yields had drifted as high as 4.45+ in the overnight session.  That’s a bit too close to the 4.50 range boundary for 11 day weekends!  But traders figured it out and started pushing back toward more central levels in spite of several Fed comments that might be considered hawkish.  Speaking of the Fed, tomorrow brings the minutes from the most recent meeting (3 weeks ago).  While Fed minutes have had huge impacts in the past, we’re not expecting fireworks from this installment.

UMBS closed the day up 18 bps at 100.53

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