Monday – October 21, 2024
UMBS are down 41 big bps in early trading.
US stock futures fell 14 points as investors looked ahead to a flurry of company earnings for signs the longest run
of weekly gains this year can continue. Oil climbed and gold touched a record on mounting tensions in the Middle East. Financial markets are being shaped by investors’ shifting views on the health of major economies on the one hand, and the impact of hostilities in the Middle East and geopolitics on the other.
The week ahead won’t have much in the way of market-moving data, but we will get existing home sales and new home sales. There will be a few Fed speakers as well. This will be a big week for earnings with Tesla, IBM, GE and a host of other companies reporting.
Pending home sales rose 2.5% last month, which was the largest increase since Jan 2023.
Nothing has changed in the outlook for Fed rate cuts, these moves are from something else although I’m having a tough time putting a finger on something concrete to blame.
Every year there are a few days where bonds move as if obviously inspired in spite of a distinct absence of obvious inspiration. Monday was one of those days. Sure, there are a few “best guesses” making the rounds, but all of them are fairly easy to debate and none of them are worth the 11.5bp jump to the highest 10yr yields in almost 3 months. News articles pointing out “the economy” or “the deficit” are grasping at straws. These things are valid, but they wouldn’t adequately account for today’s sell-off. Sometimes the explanations for these episodes become clearer in hindsight. Other times, the mystery endures. Either way, volatility remains a big risk through mid-November.
As the new week begins, the market proved it doesn’t need econ data to deliver the volatility. It makes a strong case to consider the potential for significant volatility at least through mid November (based on the notion that some of the volatility is election related). Unfortunately, it would still take economic data to push rates back down in a meaningful way and we don’t have any significant data until Thursday.
UMBS closed the day down 67 bps on the 5.0%. Down 53 bps on the 5.5, ending at 99.59. Which moves our focus coupon from 5 to 5.5
