International trade data better than expected ahead of holiday weekend

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Published Date 2/17/2023

It has been two weeks now since the bellwether 10 year note has seen any improvement, today started out the same way. For weeks in January markets were making big bets the Fed was close to stopping the rate increases, believing the Fed would capitulate on its promises of forcing inflation back to 2.0%. Over the last two weeks every one of Fed officials that has spoken, including Jerome Powell, have hammered home the Fed is not even close to ending its increases. Finally; investors, money managers, hedge funds and traders got the message.

This morning the 10 year note rose to our first technical support level. Markets were rattled by central bank hawks on both sides of the Atlantic, sending US futures down and the dollar up. An ECB policymaker said it may have to act with greater force. Stateside, Michelle Bowman and Thomas Barkin may add to the Fed’s path debate today after their colleagues’ higher-for-longer comments yesterday. It is the same coming from the ECB, Bank of France, and German central bank since the beginning of this year. Cleveland Fed President Loretta Mester said yesterday she saw a “compelling economic case” for a 50 basis-point hike at the Fed’s Jan. 31 to Feb. 1st meeting, a view echoed by her St. Louis counterpart, James Bullard.

Almost every economic measurement released over the last two months confirmed inflation is slowing, although still well above the Fed’s desires. This morning another report confirming slowing price increases. January import prices were thought to be down 0.1% m/m, prices declined 0.2%. Export prices m/m +0.8% from -3.2%; year/year exports +2.8% from +4.3%.

At 9:30 am the DJIA opened -118, NASDAQ -79, S&P -22. 10 year 3.89% +3 bp. FNMA 5.5 30 year coupon -16 bps from yesterday and -10 bp from 9:30 am yesterday.

At 10 am January leading economic indicators, expected -0.3% from -0.8% in Dec; as reported -0.3%.

Source: TBWS

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Wymac Capital, Inc.

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