Markets end the year with moderate volatility

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Published Date 12/29/2023

This morning rates began a little higher, the 10 year at 8:30 am ET +4 bps from yesterday at 3.88%, MBSs began down 7 bps from yesterday. The end of 2023 today, good riddance; next year will be better.

This year marked with volatility, the 10 year began the year at 3.74%, climbed to 5.0% in October then retreated to end 2023 at 3.89%. Through yesterday, the policy-sensitive 2-year Treasury yield was down 12 basis points for 2023, its first yearly decline since 2020. The Fed drove markets in 2023, increasing rates every FOMC meeting until November when it ended, since then the consensus has swung around to fully expect rate cuts in 2024; the mantra adopted by markets, “higher for longer” drove rates higher until J Powell conceded the Fed may be finished increasing rates, the acronym changed to the “Fed pivot.” 2023 was good for equities, the DJIA rallied 5700 points, NASDAQ 4700, and the S&P +1.000. The bellwether 10 year note going to end the year where it started at 3.89%, same thing with MBS prices.

Most traders and investors believe 2024 will avoid recession, worst case a mild slowdown. Markets so sure that there won’t be a recession that if it were to occur rates will plummet and the stock indexes will face strong declines.

At 9:30 am the DJIA opened +10, NASDAQ +6, S&P +1. 10 year at 9:30 am +5 bp at 3.89%. FNMA 6.0 30 year coupon at 9:30 am -11 bps from yesterday’s close and -28 bps from 9:30 am yesterday.

At 9:45 am December Chicago purchasing managers index, expectations at 50.0 from 55.8, the index declined to 46.9; the weak index provided some support for rates.

Nothing left today, the bond and mortgage markets will end the day at 2 pm while the stock market will trade its regular hours. Next week’s calendar has key data, the December employment report, JOLTS job openings, FOMC minutes from the 12/13 meeting, December ISM manufacturing and service sector indexes.

Source: TBWS

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