UMBS are up 39 bps – with S&P futures up 39.25 – after the first hour.
Bonds were stronger in the overnight session with most of the gains arriving right at the start. Domestic traders began buying right at 8:10am. Gains briefly extended after the claims data, but not by much. Sovereign yields are down across the board, with big declines in Gilts after the Bank of England maintained rates at current levels. We also are seeing a double-digit drop in Bund yields.
Jobless Claims = 217k vs 210k
Continued Claims = 1.818k vs 1.8k f’cast [1.783k prev]
Labor Costs Q3 = -0.8 vs 0.7 f’cast [3.2 prev]
Investors are piecing together commentary from Yesterday as the Fed left rates unchanged and Powell did not rule out the possibility of a rate hike at the next meeting noting also that cuts are still not being discussed at this time. Powell reiterated that, “the process of getting inflation sustainably down to 2% has a long way to go.”
The jobs market seems to be showing some signs of weakening based on the latest round of jobs data this week. Nonfarm payrolls will be released Tomorrow as investors continue to assess current economic conditions.
The December Fed Funds futures now predict only a 15% chance of another 25 basis point hike, a sizeable difference from a month ago, when it was closer to 40%.
in a rally also fueled by oversold conditions and positioning, the S&P 500 added almost 2% — its best session
since April. The market’s “fear gauge” — the VIX — fell below 16 and breached a key technical level. Long-term Treasuries
outperformed, with 30-year yields down 13 basis points to 4.8%. The dollar dropped. The pound gained as the Bank of England
pushed back on talk of rate cuts. Oil topped $82.
In the run-up to the jobs data, a report showed US labor productivity advanced by the most in three years, helping to
alleviate the inflationary impact of recent wage growth. Continuing jobless claims rose for a sixth straight week, indicating those losing their jobs are starting to have more trouble finding new ones. Economists are forecasting non-farm payrolls rose by 180,000 in October following September’s gain of 336,000.
UMBS closed the day up 44 bps at 100.34. 10yr dropped to 4.663% – which is nice
Freddie reported $2.7 billion in profits, a 104 percent year-over-year increase in net income in the third quarter. That boost in earnings came at the same time as a 30 percent decline in new business activity, attributed to Freddie’s credit loss reserve activity. In the third quarter of 2022, Freddie booked a $1.78 billion provision for credit losses versus a $263 million benefit for the three months ending Sept. 30.