Monday – October 25, 2024

UMBS starting the holiday week up 41 bps this morning.  Which is much needed.  Stock futures are up 29 points.

Of all of Trump’s political appointees, Treasury Secretary is the most consequential for the bond market. Scott Bessent got the nod on Friday night after the close, so there was no opportunity to witness a market reaction.  When Treasuries opened in Tokyo last night, the reaction was clear: bonds like Bessent.  This is logical considering several of his comments regarding the need for fiscal restraint as well as the gradual layering of tariffs.

Consumer sentiment improved according to the University of Michigan Consumer Sentiment Survey. The current situation index fell slightly, but the expectations index improved.  Shorter term inflationary expectations fell slightly, from 2.7% to 2.6%, however longer-term inflationary expectations rose from 3.0% to 3.2%.

Economic growth decreased in October, according to the Chicago Fed National Activity Index. This is a meta-index of 85 economic indicators and is meant to give a 10,000 foot view of the economy.  All four components (production, consumption, sales and housing were negative).

Separately, the S&P PMI composite hit a 31 month high in November. Services are the engine of growth, as manufacturing hit a 23 month low.

Bonds rallied sharply on Monday.  It wasn’t the first time we’ve seen some decent gains in the past few months, but it was definitely the first time we didn’t need to grease the skids with the highest yields in several months in the previous session.  In other words, it was a rally that arrived after a string of already fairly decent days–the first we’ve seen since September 10th. Credit goes to the announcement of Scott Bessent as Treasury Secretary who’s seen as a more fiscally conservative option–something bonds have been longing for.

UMBS closed the day up 50 big basis points at 99.53.