Monday – July 22, 2024

UMBS are up 6 bps on the open.   Stock futures up 30.5 points.
US tech stocks were poised to rebound from their worst week since April as investors looked beyond Joe Biden ending his presidential reelection campaign and mainly focused on earnings.

Market reaction to Biden’s decision to quit the race and endorse Kamala Harris has so far been fairly muted, with a Bloomberg gauge of dollar strength slipping 0.1%, while the 10-year Treasury yield dropped two basis points. Investors have been wagering on Trump’s return to the White House for weeks, trimming holdings of long-term US bonds and buying Bitcoin, among other things. Now, they’re considering whether the “Trump Trade” is still on. The uncertainty may translate into volatility for markets, though for now, much attention is on earnings and the outlook for monetary policy.

The week ahead will have some important economic data with the first estimate for Q2 GDP on Thursday, and inflation data on Friday. We also will get new home sales and existing home sales. We are in the quiet period ahead of next week’s Fed meeting. Earnings season continues with lots of big companies reporting.

The most notable development in the bond market today was the fairly abrupt (but still small-scale) sell off that took place between 11:20am and noon ET.  Oftentimes, there are at least a few reasonable options to serve as scapegoats for otherwise inexplicable market movement, but that’s arguably not the case this time around.  Is it political? If so, why did the market wait until 11:20am?  Is it related to other markets?

Stocks also sold off at the time, but they rallied back whereas bonds did not.  Europe?  The timing lines up, but the move in US bonds was bigger (the opposite of what a European influence would suggest).  Ultimately, the incredibly low volumes and range-contained losses mean we don’t have to agonize over this one

UMBS closed the day down 2 bps at 100.84