Monday – November 18, 2024
UMBS were down another 10 bps on the open. S&P Futures down 6.75 points
The week ahead won’t have much in the way of market-moving economic reports, but we will get a lot of housing data with the NAHB Housing Market Index, Housing starts and existing home sales. We will also get the FOMC minutes from the November meeting.
Industrial Production fell 0.3% in October, according to the Federal Reserve. Most of that decrease was due to the Boeing strike, and lingering effects of Hurricane Helene also contributed. Manufacturing Production and Capacity Utilization metrics both fell.
While financial news outlets continue focusing on politics and Trump’s cabinet picks, the bond market is expressing anxiety about the risk that economic data continues coming in hotter than expected. Even when it comes to the Fed, monetary policy has been and will continue to be dictated by incoming data. So what’s up with the data?
In not so many words, the jobs report that came out in early October was a major shock, both because it was very strong and also because it revised the previous 2 reports quite a bit higher. It singlehandedly changed the entire labor market outlook from one of “apprehension about the labor market” to “apprehension about the economy being too strong to warrant the Fed’s rate cut outlook.”
It was an uneventful Monday for the bond market. Economic data was limited to the NAHB Housing Market Index (builder confidence)–a report that hasn’t been a market mover since the financial crisis. And none of the news headlines had an obvious impact on trading levels. Yields started out a bit higher compared to Friday but they began improving almost immediately after the start of the U.S. business day. Based on the timing of today’s ebbs and flows, European markets were likely a consideration. Despite the modest gains, bonds remain in the middle of a well-defined uptrend in yields/rates. Until we see a big rally driven by top tier data, the best we could hope for would be for that trend to die of old age.
UMBS closed up 9 bps on the day, ending at 98.93