Markets will be focused on FOMC today

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Published Date 12/13/2023

This afternoon at 2 pm ET the FOMC policy statement, the Fed quarterly projections and Jerome Powell’s press conference. At 8 am the 10 year note 4.18% -2 bps.

At 8:30 am November producer prices. Inflation subdued; month/month PPI expected to have increased 0.1% was 0.0%, year/year expected +1.0% reported +0.9%, October year/year +1.3%. Core PPI month/month thought to be +0.2% was 0.0%, year/year core hit at 2.0% with forecasts of +2.2% and down from +2.4% in October. The year/year core at 2.0% the lowest since January 2021. When core and trade services are excluded year/year PPI at 2.5% down from +2.9% in October. Like yesterday’s CPI inflation still there but somewhat less than forecasts. The initial reaction to the report pushed rates lower, at 9 am the 10 at 4.16% -4 bps and MBS prices up 5 bps from yesterday’s close. Not a big reaction because we have the FOMC this afternoon.

Yesterday, and so far, today the 10 year yield is down 8 bps from Monday’s close.

There isn’t much now until 2 pm when the policy statement and the equally important Fed quarterly projections are released, where we can see actual numbers for employment, inflation, and Fed forecasts rather than interpreting what the policy and Powell's remarks mean in real numbers.

At 9:30 am the DJIA opened -13, NASDAQ +35, S&P +2. 10 year at 9:30 am 4.17% -3 bps from yesterday. FNMA 6.5 30 year coupon at 9:30 am +16 bps from yesterday’s close and +16 bp from 9:30 am yesterday.

Not much movement now until this afternoon. Inflation is slowing based on CPI yesterday and PPI today. Still above the Fed’s 2.0% target that may be difficult to achieve if economic growth is expected to continue. While inflation may hold above 2.0% the Fed is not going to try to drive in lower by more rate increases. The Fed is finished, now it’s a matter of when the Fed and other key central banks will cut rates. Tomorrow the ECB and bank of England policy makers will meet.

Source: TBWS

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