UMBS down 6 bps early.

Once upon a time, the bond market was more willing to react to the Durable Goods data, but the impact has been dwindling in recent years as a part of the market reprioritizing the relevance of data post-covid.

Today’s impact is very small, both in terms of volume and volatility.

Durable Goods = -6.1 vs -4.5 f’cast   [-0.3 prev]

Durables excluding defense and aircraft = 0.1 vs 0.1 f’cast  [-0.6 prev]

US equity futures moved in small ranges, with investors reluctant to make big wagers as they await economic data and commentary from Federal Reserve speakers in coming days for clues on the outlook for interest rates.

Based on 6/23 data, 19% of households used buy now, pay later (BNPL) loans in the past year. BNPL use peaks at 43% among households with credit scores below 620. Usage is also highest, at 41%, among households who had a credit application rejected, and 37% for those 30+ days delinquent during the past year. Even more worryingly, many are using BNPL to buy groceries. These are generally fragile households.

New home sales rose 20% MOM to a seasonally-adjusted annual rate of 661,000. This was up about 2% on year-over-year basis. The median home price fell 2.6% YOY to $420,700. The sales number came in below expectations.

House prices rose 6.5% YOY, according to the FHFA. “U.S. house prices increased modestly over the course of 2023,” said Dr. Anju Vajja, Acting Deputy

Director for FHFA’s Division of Research and Statistics. “However, the market showed signs of softening as house price appreciation was lower in the fourth quarter of the year than in the previous quarter.”

The 5 states with the highest appreciation were unusual: Rhode Island, Connecticut, West Virginia, Vermont and New Jersey.

The Case-Shiller Home Price Index rose 5.5% in December, an acceleration from the 5% reported in November. “2023 U.S. housing gains haven’t followed such a synchronous pattern since the COVID housing boom. The term ‘a rising tide lifts all boats’ seems appropriate given broad-based performance in the U.S. housing sector. All 20 markets reported yearly gains for the first time this year, with four markets rising over 8%. Portland eked out a positive annual gain after 11 months of declines. Regionally, the Midwest and Northeast both experienced the greatest annual appreciation with 6.7%.”

The economic data drought finally began to dry up this morning with Durable Goods being the first remotely relevant report since last Thursday.  Results were mixed for the bond market with most of the normal line items seemingly being good for bonds. The more obscure “core capital goods shipments” was bad for bonds due to its implications for Q1 GDP.  While that’s not the GDP data coming out this week, it was still enough to reverse the microscopic gains seen in the first minute or two of the trading reaction.  Of course all of the above is much ado about nothing in the bigger picture as bonds must continue waiting for truly meaningful data.  There was similarly uneventful volatility surrounding the 7yr Treasury auction, but yields remained under the prevailing technical ceiling at 4.32%.

UMBS closed the day up 2 bps at 100.20

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