A calmer day for markets ahead of the weekend

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Published Date 11/17/2023

Early this morning (7 am ET) the 10 year note traded down to 4.37% -7 bps from yesterday’s close; by 8:30 am the note was unchanged at 4.44%.

At 8:30 am October housing starts and permits, the only data today; starts expected at 1.350 million increased to 1.372 million, permits expected 1.463 million increased to 1.487 million. Construction of new homes rose 1.9% in October, as builders amped up new projects. Yesterday the Nov NAHB housing market index dropped to 34 from 40 in October, the lowest level since December 2022. Builders increased cost cutting and other incentives, the share of builders cutting prices to boost sales rose to the highest level since November 2022, to 36%, the NAHB said, from 32% over the last two months. The average price cut was 6%. The data used to calculate the index occurred prior to last two weeks before interest rates declined, 30 year fixed loans have declined 45 bps since then, the December index will show improvement.

Inflation is slowing and will continue to decline although we don’t expect 2.0% inflation for months or longer. Whether 2.0% or 2.5% is not going to change the direction of the economy or the Fed’s continuing to push for 2.0%. The Fed is finished increasing rates, the thinking now in markets is when the Fed might begin lowering rates. The 10 year note yield over the last month has fallen from 5.0% to today’s 4.43%.

At 9:30 am the DJIA opened quietly +42, NASDAQ -16, S&P +2. 10 year at 9:30 am 4.43% -1 bp. FNMA 6.5 30 year coupon at 9:30 am +6 bps from yesterday’s close and +9 bps from 9:30 am yesterday.

There isn’t much left today, the President signed the debt extension resolution yesterday so that problem is back in the bottle until January when it will start again. Two Fed officials, Chicago Fed Goolsbee and San Francisco Fed President Mary Daly. Neither is likely to say anything we haven’t heard numerous times from Fed officials.

Looking for quiet markets today. Next week is a holiday week with Thanksgiving on Thursday. By next Wednesday many will take the rest of the week off, the treasury market will close at 2 pm on Friday.

Source: TBWS

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