UMBS 6.5 are up 44 bps early.
Bonds were only modestly stronger overnight but are adding to the gains after the jobs report. While this is a miss, it isn’t a huge miss, so it remains to be seen what kind of legs this rally has.
Nonfarm Payrolls = 150k vs 180k f’cast [297k prev]
Unemployment Rate = 3.9 vs 3.8 f’cast [3.8 prev]
Earnings = 0.2 vs 0.3 f’cast [0.3 prev]
Netting Revisions, NFP are 101k from prior 2 months
Overall, this report shows the Fed’s tightening is gaining traction. The markets are definitely in “bad news is good news” mode. The 10 year and the 2 year bond yields dropped by 12 basis points on the report, and the Fed Funds futures dropped the chance of a December hike to 10% and bumped up the chance of a rate cut in March to 21%.
The services economy expanded in October, albeit at a slower pace than September, with the ISM report falling from 53.6 to 51.8. Production and Employment fell, although some services reported that labor costs remain an issue. Pricing pressures remain elevated, although the pressure does appear to be easing. Strikes are having an effect on labor costs overall.
Stock futures rose and bond yields fell after signs of a labor-market slowdown bolstered speculation the Federal Reserve is done with interest-rate hikes. S&P 500 futures signaled the equities will gain a fifth straight day. The gauge is currently on pace for its best week since November.
For the last couple of days, the bond market moves seem to be outsized relative to the potential drivers. Does that mean that people are seeing this as a top? Or just wacky trading. It’s hard to tell. Given the immense gains in bonds this week and the surprisingly robust translation to rate sheets, it’s hard to advise against taking chips off the table.
Friday’s weak jobs report and strong bond market reaction raise bigger questions than they answer. Granted, it is very nice to answer the question of whether the gains over the past two days were justified, but now we have to wonder if this entire week is enough to inform a long-term rate ceiling. Using our own advice about needing to see 2-3 months of similar data before drawing such conclusions, clearly it’s not enough. If we could know that the next 2 rounds of big-ticket data would be similarly cool, the top is in for rates. That’s still a big “if.”
UMBS ended the day up 52 bps at 100.84. 10 yr sunk a little lower to 4.577 – thankfully
Follow the money. “Blackstone Real Estate Income Trust’s investors sought to pull $2.2 billion last month, compared with $2.1 billion in September… BREIT returned about $1.3 billion to investors, or about 56 percent of what was requested, the ‘highest payout percentage’ since redemptions were restricted last year… The real estate trust is a colossus in U.S. property markets, with its reach spanning from apartments to data centers. In late 2022, BREIT curbed withdrawals after redemption requests picked up and its wealthy clients became jittery about having money locked into commercial real estate.”
Rocket Companies, under the leadership of its new CEO, reported a net income of $115 million for the third quarter. This marks a decrease from $139 million in the previous quarter, but an impro