Monday – August 26, 2024

Week started in the red this morning- UMBS down 3 bps.  S&P Futures are up 9.25
US futures struggled to make headway on Monday as investors assessed the implications of Federal Reserve policy easing following Chair Jerome Powell’s dovish tilt. Contracts on the S&P 500 and Nasdaq 100 were little changed after both indexes notched gains of more than 1% on Friday.

Powell’s Jackson Hole speech all but sealed the case for an interest-rate cut next month, but the debate has shifted to the size of the cut and what that would say about the state of the economy.

Durable Goods =  9.9% vs 5%   [-6.6% prev] Core Cap Ex= -0.1% vs 0.0%  [1% prev]

The Durable Goods report is a somewhat inconsistent report in terms of its ability to influence the bond market.  There are definitely examples of big reactions, but equally as often, the data fails to inspire–even in cases of big beats/misses.  And sometimes there are even paradoxical reactions as is the case with today’s beat (9.9 vs 5.0 f’cast) giving way to a moderate bond market rally.

Starter home pending sales rose 10% in July, according to research from Redfin. The overall market remains sluggish, but we are beginning to see first-time homebuyers come off the sidelines, buoyed by falling mortgage rates and an increased number of homes hitting the market

Durable goods data made for a semblance of volatility this morning, with the core components resulting in a small rally at 8:30am.  Bonds bounced back into weaker territory at 9:30am amid NYSE trade flows.  There was another mini-rally and another mini-sell-off ultimately giving way to an extremely narrow range near unchanged levels for the rest of the day.  MBS outperformed Treasuries by an amount that makes good logical sense on a Treasury auction week.  All in all, it may as well have been a 3 day weekend.

UMBS closed pretty much flat – up 1 bp total.  Ended day at 100.94