Tuesday – October 8, 2024
UMBS pretty flat on the open – up 2 bps. Stock futures up 21 points.
Friday’s NFP gave the bond market a solid whack, sending yields quickly higher. Momentum remained intact over the weekend and through Monday. Overseas markets were more willing to try to push back in the overnight session on Tuesday morning, but a modest selling trend remains intact. The good news is that the negative momentum is waning… probably.
St. Louis Fed President Alberto Musalem said yesterday that he supported the 50 basis point cut, but prefers a gradual approach going forward.
Small business optimism improved slightly in September, however it remains well below its 50 year average, where it has remained for the past 33 months. Uncertainty hit a record high.
The average mortgage payment hit a record high of $2,070 in August, according to the ICE Mortgage Monitor. This is up $400 from the start of 2020, and $140 compared to a year ago. The average insurance payment is up 52% from the start of 2020 and in some areas has almost doubled.
A rally in large tech companies lifted stocks, while a decline in Treasuries paused as expectations of Federal Reserve rate cuts stabilized. Oil prices fell, with most major S&P 500 sectors advancing, led by chipmakers like Nvidia, which continued its rally. The Nasdaq 100 rose 1%, and the VIX dropped as volatility eased. Fed officials emphasized a balanced approach to controlling inflation while maintaining economic growth, and market uncertainty remains as investors navigate mixed signals on future interest rate cuts.
Good things happened in the bond market on Tuesday. There was a bit of a scare in the AM hours as a relatively flat overnight performance gave way to some early weakness, but buyers showed up at the 4.05% technical level in 10yr yields (a major inflection point on the way up in the first quarter of 2024). That doesn’t mean rates can’t go higher ever again, but this show of support effectively ends the sharp, initial phase of negative momentum that can follow big events like Friday’s jobs report. The baseline is sideways in a choppy range until we get the next compelling data. Don’t expect any major favors from Thursday’s CPI. Reasons for this are discussed in today’s MBS Live recap video.
UMBS closed the day UP 11 bps at 100.48.
