UMBS starting the day up 6 bps.

US stock futures pointed to a muted Wall Street open as data showed a sharp slowdown in China’s industrial profits, reinforcing investor concerns about its sluggish economy.  Fresh economic data due this week from the US and Europe will help traders gauge whether stocks can keep adding to gains.

Markets have been buoyed in recent weeks by conviction that further interest-rate hikes from the Federal Reserve and European Central Bank are unlikely. The VIX index, known as Wall Street’s fear gauge, fell last week to its lowest level since January 2020.

The week ahead will have some important economic data with inflation, home prices, the second revision to Q3 GDP, and the ISM data.

New Home sales fell 5.6% in October, according to the Census Bureau. This was up almost 18% from a year ago. The number was well below expectations given that interest rates spiked in October. The median new home price was down 18% compared to a year ago.

Black Friday sales online rose 7.5% YOY, to record levels. Some of that increase is due to inflation, and changing consumer preferences over how to shop. It looks like in-store purchases were up only 1% compared to a year ago.  We did see a 73% increase in consumers using buy-now-pay-later, which isn’t necessarily a great sign for consumer spending.

  • 5yr Treasury Auction
    • 4.42 vs 4.425 f’cast
    • Bid to cover: 2.46x vs 2.36x prev (2.52x avg)

While the auction stats were just barely stronger, that strength is more meaningful in context.  Specifically, bonds have been rallying gradually all day as opposed to building in the sort of concession occasionally seen in the hours leading up to large auctions.

In other words, if the set-up had been more normal, the stats likely would have been stronger.  Either way, bonds like it.

For those who’d been watching bond markets on Friday’s half day, it was perhaps slightly disconcerting to see a week’s worth of gains quickly erased.  And while there was no guarantee that “whatever happens on the Friday after Thanksgiving can easily UN-happen the following week,” here we are back in last Wednesday’s range with help from a merely decent 5yr Treasury auction.  Incidentally, last Wednesday’s range saw bonds near their best levels in 2

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