Wednesday – October 16, 2024

UMBS up 6 bps in early trading.  S&P stock futures up 2 points.

San Francisco Fed Chair Mary Daly is open to skipping a rate cut at one of the two remaining Fed meetings this year. Even though the December Fed Funds futures still overwhelmingly see two more cuts this year:

With the new week’s trading easily holding inside last week’s rate range, we have the best confirmation yet that a mostly sideways holding pattern has been achieved after the most recent jobs report sent yields sharply higher.  Thursday morning is a focal point for potential volatility this week due to the confluence of economic data in the 8:30am ET time slot.  As such, Wednesday night is a high risk/reward situation.  Risk averse clients will remain lock-biased until after the next jobs report and any election-related volatility at the very earliest.

While there was certainly a bit of an upward drift in Treasury yields through the end of last week, mortgage rates and MBS saw it as a bit more of a sideways grind.  Last Thursday’s data had a chance to create some momentum, but ultimately failed.  Thursday is also this week’s most active day for potentially significant econ data with Retail Sales likely getting the most attention.

That said, “attention” has a lot to do with the size of beat/miss.  As always, the market is already priced to reflect the median forecast, so there’s no way to know if one outcome is more likely than another.  What we do know is that Thursday’s data is not in the same league as the big jobs report or several other events in early November.  It’s just the best we have this week.

UMBS closed the day up 9 bps at 98.89