UMBS up 3 bps on the open. Stock futures up 14.25 points.
Stock futures pointed to a longer advance for the S&P 500 as investors sought vindication from Federal
Reserve Chair Jerome Powell for bets on monetary easing. Contracts on the S&P 500 futures rose 0.3% while those on the Nasdaq 100 added 0.4%. Treasuries advanced, with yields on two-year Treasuries near a three-month low.
Jerome Powell gave his semiannual Humphrey-Hawkins testimony yesterday. Here are his prepared remarks. On the subject of rate cuts, he said: “The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent. Incoming data for the first quarter of this year did not support such greater confidence. The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”
Powell did mention that the economic risks are no longer unbalanced between inflation and growth. The labor market is back at pre-pandemic levels, and we are continuing to see wage growth slow. The blip in inflation in Q1 looks to be over, and the September Fed Funds futures moved slightly more dovish, with a 75% chance of a rate cut. The July futures still see very little chance of a change in policy. The 10 year bond yield fell a couple basis points, but overall the markets didn’t move much.
The Biden Administration is looking to ease the requirements for title insurance for some low-risk refinancings. While title insurance is a requirement for Fannie and Freddie mortgages, it is looking to ease the requirement for some borrowers, which can save hundreds on closing costs.
We’ve officially run out of ways to characterize the boring, sideways grind in the bond market that’s been intact since last Friday afternoon. One would think that with Fed Chair testimony and a Treasury auction cycle that we’d at least some moderate volatility, but alas! Perhaps the market is saving it all for Thursday’s CPI. For those that have to know what happened today, there was a 10yr Treasury auction. It was well-received but not stellar enough to inspire any new buying. Fed Chair Powell reiterated the same messages as yesterday and markets cared even less. As always, CPI means rates could go either way, in a big way.
UMBS ended the day up 2 bps at 100.70