Yesterday the 10 yr. note fell 20 bps to 3.63%, MBS prices increased 83 bps, 20 of those bps occurring between 4 pm ET and 5 pm ET. Stock indexes took back Friday’s losses and then some, DJIA +765.
After months of the US dollar increasing (+10%) now worries appear to be mounting that the dollar’s strength will damage global markets as most central banks and borrowers have borrowed in dollars and in turn putting many economies in potential jeopardy. The dollar’s strength, like the beat-up stock market and huge increases in interest rates are joining hands recently. The dollar is weakening, stocks improving and rates declining.
The ISM manufacturing index fell yesterday last Friday the Chicago purchasing mgrs. index also declined. Markets see the soft reports as adding to the idea that the Fed should stop increasing rates at its present speed. Japanese stocks surged the most since early March as weak US economic data sparked a global rally on hopes for slower Federal Reserve tightening. The rally in Japan in stocks came even as a gauge of inflation in Tokyo accelerated for a fourth consecutive month to rise at the fastest pace since 1992.
One week ago, it was universal that the Fed was not going to back down from its intent to crush inflation regardless of the impact on the economy. Powell and most all Fed officials that have been speaking recently continue their mantra of breaking the back of inflation. Now though, in a matter of a week traders are betting the Fed will ease its assault because of some weak data over the last few sessions. Those trying to call an end to the relentless rise of interest rates have been burnt before, speculation over the summer of a Fed pivot was dramatically shut down by hawkish comments from Fed Chair Jerome Powell at Jackson Hole in August. New York Fed President John Williams said yesterday that while tighter monetary policy has begun to reduce inflationary pressures, “our job is not yet done.” Yesterday Richmond Fed Pres. Barkin, “There are a lot of countries in the world that have chosen to borrow in dollars and so these get more expensive.” “You could worry about the risk of financial contagion as the dollar -- I mean there’s a whole bunch of stuff to worry about it. It should be keeping me up at night,” Barkin said. “But in the end, our mandate is to help operate the US economy. So, you worry about it most in terms of does it affect the US economy.”
Friday’s Sept employment data, always a critical release (and always volatile), may add to, or remove, the present more optimistic outlook for rates that has taken hold the last few sessions. The estimates for job additions are for less jobs than in August (NFP +250K from 315K, private jobs 280K from 308K). Tomorrow ADP will report its private job growth, forecasts are for 200K jobs from 132K jobs in August. Also, tomorrow Sept ISM non-manufacturing index is expected at 56.0 from 56.9.
At 9:30 am the DJIA opened +367, NASDAQ +233, S&P +60. 10 yr. note at 9:30 am 3.61% -2 bps. FNMA 5.5 30 yr. coupon +3 bps from yesterday’s close and +34 bps from 9:30 am yesterday.
At 10 am August JOLTS job openings were expected at 11.150 mil from 11.239 mil in July, job openings increased 10.05 mil.
PRICES @ 10:00 AM
10 yr note: 3.63% unch
5 yr note: 3.86% -2 bp
2 Yr note: 4.10% unch
30 yr bond: 3.70% +1 bp
Libor Rates: 1 mo 3.174%; 3 mo 3.748%; 6 mo 4.273%; 1 yr 4.8003% (10/3 22)
30 yr FNMA 5.0: 98.34 +9 bp (+43 bp from 9:30 am yesterday)
30 yr FNMA 5.5: 100.22 +3 bp (+34 bp from 9:30 am yesterday)
30 yr GNMA 5.0: 98.70 +3 bp (+43 bp from 9:30 am yesterday)
Dollar/Yen: 144.77 +0.21 yen
Dollar/Euro: $0.9919 +$0.0095
Dollar Index: 110.95 -0.80
Gold: $1715.90 +$13.90
Bitcoin: 20,085 +495
Crude Oil: $86.00 +$2.37
DJIA: 30,123 +632
NASDAQ: 11,106 +291
S&P 500: 3767 +89