Tuesday - October 15, 2024

UMBS were up 13 bps in early trading.  Thank God it's green for once.  Stocks up 1.25 points.

Bonds moved into stronger territory over the 3 day weekend in a move largely attributed to de-escalation in the Middle East and the sharp drop in oil prices that followed. Oil and bonds are far from perfectly correlated, but big moves in the former often get at least some attention from the latter. Gains were modest by the start of trading today but the weaker NY Fed Manufacturing data helped facilitate some additional buying.

Manufacturing activity in New York State contracted as new orders fell. “Manufacturing activity contracted modestly in New York State in October, with firms reporting that new orders declined. Despite this contraction, employment expanded for the first time in a year, though by a small degree, and optimism about the outlook grew strongly.”

Fed Governor Chris Waller signaled that 50 basis point rate cuts are probably not in the cards going forward.

Bank of America reported better than expected earnings based on higher trading revenue. Mortgage origination volume fell 5.4% YOY to $5.3 billion. Home equity origination fell slightly to $2.3 billion.

Citi also reported better than expected earnings. Mortgage origination volume rose 18% YOY to $4.6 billion.

Last week's bond market action offered some glimmers of hope that the most recent jobs report wouldn't cause ongoing momentum toward higher rates, but yields nonetheless hit their highest levels on Thu/Fri.  Today is a victory in that context as bonds moved back into the lower half of last week's trading range and all without any major market movers in play.  To be fair to the NY Fed Manufacturing index, it was a market mover and it did help set a rate-friendly tone out of the gate.  That said, the move looked more like a yield curve adjustment as opposed to a widespread bond rally (i.e. 30yr yields dropped 9bps while 2yr yields were basically unchanged).   Thursday AM's data is higher consequence.

UMBS closed the day up 8 bps at 100.31

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