UMBS down 25 bps in early trading.  The 5.5 coupon down 41.

Powell told CBS Sunday that the central bank would be cautious about rate cuts and that the Fed was still searching for additional evidence of inflation returning to the Fed’s target of 2%. Powell also concluded that the pace of rate cuts would likely be slower than the market is anticipating. The Unemployment report released Friday showed unexpected signs of resilience with payrolls far exceeding forecast.

The chance of a quarter-point of easing in March fell to almost 10% after Powell’s comments. Just four weeks ago, a move by then was considered a near certainty by investors. The pickup in average hourly earnings and overall strength in hiring suggests the odds of a rate cut in March are quickly fading but the drop in the average workweek to 34.1 hours from 34.3 hours reflected weakness below the strong surface. While investors and average Americans are eager for the Fed to unwind some of its interest-rate hikes, the central bank is expected to hold rates steady for a fifth consecutive meeting in March.

Investors said they’ll be paying close attention to the line up of central bank speakers this week for more clues about the direction of monetary policy. Chicago Fed President Austan Goolsbee is scheduled to speak on Bloomberg TV later today, while Cleveland Fed President Loretta Mester and Minneapolis Fed President Neel Kashkari are due to provide remarks on Tuesday.

Services PMI at 53.4 vs 50.5 prev  [52.9 f’cast]

New orders rose to 55.0 vs 52.8

Employment rose to 50.5 vs 43.8

Pretty self explanatory outcome here… ISM Services is the more meaningful of the two ISM PMIs. There was some asymmetric risk due to last month’s exceptionally low employment component.  Now this report reverses that move in addition to coming in stronger at the the headline level.

Zillow thinks the hottest real estate market in 2024 will be Buffalo, NY. The other hot markets are Cincinnati, Columbus, Indianapolis, Providence, Atlanta, Cleveland, Charlotte, Orlando, and Tampa.

Potential migrants to Buffalo should Google the term “lake effect snow.”

Bonds sold off again today, but this time in several distinct waves.  The first wave occurred instantly as trading opened in the overnight session.  10yr yields jumped immediately from 4.02 to 4.08 as investors reacted to Powell’s 60 Minutes interview (which reiterated that strong econ data means the Fed is in no hurry to cut).  Stronger econ data in Europe pushed EU yields higher, kicking off the 2nd wave of selling and taking 10s to 4.12.  Then in U.S. hours, a broadly stronger ISM Services PMI kicked off the 3rd wave, taking yields over 4.16% by the 3pm CME close.  With that, bonds are basically back in line with January’s highs unless you ask shorter-term bonds (more influenced by Fed Funds Rate expectations) which are the highest since the Dec 13th Fed announcement.

UMBS closed the day down 25 bps on the 6.0 coupon.  5.5 lost a half point.

Also, in Real Estate News:  Keller Williams has agreed to pay $70m to settle their Sitzer Burnett price fixing case in Missouri

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