Tuesday – October 1, 2024

UMBS opened UP 13 bps on the morning. S&P futures down 3.75 points.  Would have thought more.

The following unconfirmed newswire is causing a flight to safety in the bond market:

UNITED STATES HAS INDICATIONS THAT IRAN IS PREPARING TO IMMINENTLY LAUNCH A BALLISTIC MISSILE ATTACK AGAINST ISRAEL –SENIOR WHITE HOUSE OFFICIAL.

Unfortunately, the newswire coincided perfectly with the 9:30am NYSE open, and given that this is the first trading day of a new month, we can’t rule out that the NYSE Open was also a market mover in this case (but the spike in oil prices makes it more clear).

Ultimately came to fruition, with 180 missiles being launched into Israel.

S&P Manufacturing PMI = 47.3 vs 47.0 f’cast,     [47.9 prev]

ISM Manufacturing  =  47.2 vs 47.5 f’cast,        [47.2 prev]

ISM Prices Paid  =  48.3 vs 53.3 f’cast,      [54.0 prev]

Job openings = 8.04m vs 7.66m f’cast,     [7.71m prev]

Job quits = 3.084 vs 3.27m prev (lower is better for rates)

Jerome Powell spoke yesterday at the National Association of Business Economics in Nashville, TN. He said that the labor market was solid, and that inflation is much closer to the Fed’s 2% goal. The Fed sees the downside risk to slower growth and the upside risk of higher inflation as balanced and is not on a preset course.

Just 30 minutes before the month’s most important week of economic data was about to hit its stride, headlines hit the newswires regarding an imminent missile attack on Israel.  While various iterations of such headlines are unfortunately common, these examples got the market’s attention, resulting in a quick “flight to safety” trade (stock prices and bond yields moved lower).  When the AM econ data came out 30 minutes later, the impact on bonds was insignificant by comparison.  The initial flight to safety was unwound in the afternoon, but bonds remained in moderately stronger territory on the day.

UMBS closed the day up 11 bps at 101.29