Friday – November 15, 2024

UMBS down 19 bps in active early trading.  Stocks down 30.5 points.  Double loser morning.

Retail Sales  =  0.4 vs 0.3 f’cast

last month revised to 0.8 from 0.4

NY Fed Manufacturing = 31.2 vs -0.7 f’cast,    [-11.9 prev]

Import Prices = 0.3 vs -0.1 f’cast,     [-0.4 prev]

Export Prices = 0.8 vs -0.1 f’cast,      [-0.6 prev]

Of this morning’s 8:30am econ reports, Retail Sales is the most consequential.  Despite “whisper numbers” calling for below-consensus results, the most recently headline is higher in addition to last month being revised significantly higher.  Bonds have reacted logically, and arguably not as much as one might expect given the implications.

Also in reaction to comments from Fed Chair Powell’s comments yesterday about not being in a rush for further rate cuts.  Boston Fed President Susan Collins said that a December Fed Funds cut is “not a done deal.”  “There’s more data that we will see between now and December, and we’ll have to continue to weigh what makes sense….As far as I can tell, I do not see evidence of new price pressures.  I don’t see an argument for maintaining restrictive policy when there is not evidence of new price pressures, and the old dynamics are perhaps unevenly and gradually resolving over time” said Collins.

All 3 of this morning’s 8:30am economic reports were stronger than expected, and the 9:15am report was right in line with expectations.  Of these, Retail Sales is the headliner, coming in at 0.4 vs 0.3 f’cast.  Additionally, last month was revised up to 0.8 from 0.4.  That’s fairly bad news for the bond market, but it’s mitigated somewhat by the softer internal components (measures that exclude certain volatile components like autos/gas/building materials were below forecast).

This morning began like many other recent mornings with economic data making a strong, logical case for bonds to move in a certain direction only for bonds to subsequently reverse course and do something else.  In today’s case, it was Retail Sales that pushed yields higher at first.  Perhaps it was also Retail Sales that allowed for a friendly correction as traders digested the report’s internal components (which weren’t as favorable as the headline).  Either way, bonds were able to get all the way back to positive territory by the afternoon.  That’s good in and of itself, but with 10yr yields still over 4.4%, the uptrend is still intact in the bigger picture.

UMBS closed the day down 9 bps.  After actually turning green for a min.  Final price at 98.83.