Monday – December 9, 2024
UMBS are down 7 bps on the open. Stock futures are down 4 bps.
USTs are slightly cheaper and steeper this morning compared to Friday’s closes. Over the weekend, South Korean President Yoon survived an impeachment move, another vote is scheduled for December 14th. Syrian President Bashar al-Assad resigned and fled the country yesterday to Russia, ending the Assad regime’s 50 years in power. The announcement came a little over one week after rebels captured the country’s commercial capital of Aleppo in a days-long assault. They then captured the cities of Hama and Homs before taking control of the capital, Damascus, yesterday.
In an NBC interview over the weekend, President-elect Trump reiterated his tariff threats to Mexico and Canada, but offered no new developments. UK job vacancies recorded its steepest decline in four years, marking 13 consecutive months of falling staff numbers.
The upcoming week will be all about the consumer price index which will be released on Wednesday. There will be no Fed speakers. We will also get productivity numbers and the producer price index. The December Fed Funds futures still see a 85% chance of a rate cut next week.
Redfin has put out its 2025 predictions for the housing market. They predict that home sales will increase in 2025 as a result of pent-up demand. However, home prices will continue to grow, and wages should increase. Home price appreciation is expected to continue as for-sale inventory remains on the low side. Redfin sees 4% home price appreciation next year.
Consumer sentiment improved in December, according to the University of Michigan Consumer Sentiment Survey. Part of the increase was an increase in buying conditions for durable goods, which the survey attributes to consumers anticipating future tariff increases. The survey saw the continued bifurcation of sentiment based on political affiliation, with Republicans getting more optimistic and Democrats becoming more pessimistic.
On inflation expectations increased for the next 12 months, rising from 2.6% to 2.9%. On the other hand, longer-term inflation expectations fell from 3.2% to 3.1%.
Bonds lost a moderate amount of ground on Monday with 10yr yields moving back above the levels seen before last Friday’s jobs report. MBS didn’t lose quite as much ground thanks to their higher correlation with shorter-dated Treasuries these days. There were no significant economic reports and it was the lowest volume day of the year so far–a stunning reality considering that honor would usually go to the Friday after Thanksgiving. In addition to the low volume qualifier, today’s weakness is inconsequential simply because it keeps bonds right in line with the flat-line in yields seen over the past 6 trading days. If anything, Friday was the outlier there and today is just another day with 10yr yields near 4.20. It’s also just another day where bonds are grinding sideways as they wait for bigger inspiration.
UMBS closed the day down 20 bps at 100.03