Market Update for the Week of December 5, 2022
Although we did see some volatility in rates, they did improve overall last week. The main reason we saw rates improve was Fed Chair Jerome Powell’s speech on Wednesday, which gave markets the impression that the Fed may not hike policy rates as high at the upcoming meetings as he led them to believe during his last press conference. Friday’s commentary saw bonds in the thick of a sell off as the stronger than expected jobs data came in. Bonds not only recovered from the losses but ended the day positive.
𝗠𝗼𝗿𝘁𝗴𝗮𝗴𝗲 𝗥𝗮𝘁𝗲 𝗙𝗼𝗿𝗲𝗰𝗮𝘀𝘁:
This week shouldn’t shake things up for rates too much, as all eyes are on next week’s CPI inflation data and the Fed meeting. The CPI data comes out on Tuesday, and the Fed concludes the next FOMC meeting on Wednesday when it is expected to raise policy rates by a half point. It will be Fed Chair Jerome Powell’s press conference though that will be the big market mover, and we will also get the Fed dot plot showing where Fed members think rates will top off next year and for how long rates will stay elevated.
𝗪𝗵𝗮𝘁’𝘀 𝗮𝗳𝗳𝗲𝗰𝘁𝗶𝗻𝗴 𝗿𝗮𝘁𝗲𝘀 𝘁𝗵𝗶𝘀 𝘄𝗲𝗲𝗸:– Economic data: We aren’t likely to see too much of a response to most of the data this week, but Friday’s wholesale inflation data should be watched. It won’t have the same effect that the CPI consumer inflation report will have next week, but it could affect rates for Friday.
– The Fed: Fed members are in a blackout period ahead of next week’s meeting, but markets will still adjust based on expectations of how high the Fed will raise policy rates heading into 2023. Current expectations are 5% by May.
TECHNICALS:
The UMBS 5.5 coupon (MBS or mortgage backed securities) at 101.03, down -66bps. A bit choppy today.
The 10yr Treasury yield at 3.579%.
Show me today's rates (Dec 1st, 2023)