A calmer day for markets after a volatile week

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Published Date 12/15/2023

Overnight the bellwether 10 year note yield traded down 3 bps from yesterday’s close at 3.90%, by 8:30 am ET at 3.96% +3 bp. MBS prices began today down 8 bps from yesterday’s close. Time for some consolidation after the massive declines in rates this week. The Fed and Powell cleared the path for those still thinking the possibility of the Fed increasing rates and holding back on cuts. After the Wednesday FOMC meeting markets now fully believe rate cuts next year are in play.

Seems it never changes, just when it appears all Fed officials are on board someone must disagree, this time NY Fed President Williams. Williams saying this morning that interest rates are “at the right place” to get inflation under control. He commented that it is “premature” to discuss rate cuts as soon as March. “If we get the progress I am hoping to see on inflation and the economy, then of course it will be kind of natural to move monetary policy over a period of a few years to a more normal level,” he said.

Early this morning the December NY Empire State manufacturing index plummeted to -14.5 against forecasts of +3.7 that in November was +9.1%. Not what we call a first-tier data point but does imply NY isn’t much of manufacturing base. New orders fell 6 points to negative 11.3 and dropped for the third month in a row. Shipments also declined.

November industrial production expected at +0.3% reported at +0.2%, month/month October -0.9%. Manufacturing output +0.3% from -0.8% in October. The Capacity utilization rate thought to be 79.1% reported at 78.8%.

At 9:30 am the DJIA opened -71, NASDAQ +25, S&P -12. 10 year note at 9:30 am 3.93% +1 bp. FNMA 6.0 30 year coupon at 9:30 am -13 bps from yesterday’s close and +1 bp from 9:30 am yesterday.

At 9:45 am the FLASH (preliminary), the manufacturing index 48.2 against 49.2 estimate, the service sector index expected at 50.6 increased to 51/3; the composite of the two 51.0.

Source: TBWS

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