UMBS opened up in small green numbers.  +4 bps in early trading.    Stock futures are up 12 points.  Everybody wins!!
The week ahead will have some important inflation data with the consumer price index and the producer price index on Tuesday and Wednesday. We will also get housing starts and retail sales.

Interest rates are beginning to drop on consumer and auto loans, according to the NAHB. The average rate on credit cards fell from 21.6% to 21.5%. The average rate on 60 month car loans fell from 8.22% to 8.2%. Delinquencies, especially on credit cards, are rising.

As bond markets have moved to account for a Fed that is “behind the curve,” the risk isn’t “priced into current equity multiples,” according to Morgan Stanley strategists. The team led by Michael Wilson said economic growth is the primary concern for investors, rather than inflation and rates.

“Markets are looking for better growth or more policy support to get excited again,” the team wrote in a note. “We don’t see confirming evidence in either direction near term, leaving the index to trade in a tight range for now.”  Still, investors did take flight from stocks during last week’s wild swings. They reduced their equity allocations at the sharpest pace since the onset of the Covid pandemic, according to data from Deutsche Bank AG.

From a volume standpoint, both Friday and today were very light.  This isn’t a surprise at this time of year, nor is the absence of any meaningful impact on the bigger picture trend (contrast this to last Monday which was the 2nd highest volume day of the year and truly exceptional for a number of reasons).  Today means the bond market is falling back into a vanilla routine that involves consolidation ahead of this week’s big ticket economic reports.  There could have been modest losses or gains without affecting the set-up.  As it happened, we got the version with modest gains.

UMBS closed the day up 7 bps at 100.42