Thursday – August 29, 2024

Mortgage backed securities were down 6 bps in the first hour of trading today.  Stock futures up 15 points

The key number on Thursday morning’s continues to be Jobless Claims as the Fed has turned squarely toward the labor market (inflation is on the watch list, but generally assumed to be going where they want).

While claims were basically in line with the consensus, the bond bulls are at odds with economists.  A flat result is one that does not argue in favor of a 50bp rate cut.

Jobless Claims = 231k vs 232k f’cast,    [233k prev]

Continued Claims = 1868k vs 1870k f’cast

GDP (2nd revision) = 3.0 vs 2.8 f’cast,

GDP Deflator = 2.5 vs 2.3 f’cast, 3.1 prev

* driven primarily by an increase in inventory and higher consumer spending. Housing was a drag on growth.

Core PCE Prices (q/q annualized) = 2.8 vs 2.9 f’cast

Build times for new homes continue to increase, according to the NAHB. Since 2020, the time from permit receipt to completion has increased from 7.8 months to 10.1 months. Regulatory red tape, supply chain issues and a shortage of skilled labor are the main drivers. The Northeast is the worst offender, with build times around 13.5 months.

After this morning’s initial reaction to Initial Jobless Claims, the rest of the day was uneventful and sideways.  By 9:00am, 10yr yields had risen about 4bps to 3.866–which was the exact same level seen at the 3pm close.  MBS outperformed in day over day terms, but had a distinct moment of underperformance just after 3pm.  From here, we get into consistent daily doses of big ticket econ data culminating in next Friday’s jobs report.  Volatility potential is increasing accordingly.

UMBS closed the day down 10 bps at 100.84