The Consumer Price Index for October met expectations

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Published Date 11/13/2024

Prior to 8:30 am ET the 10 year note +2 bps, MBS prices down 6 bps. CPI at 8:30 am stopped the increases. It has been a while that CPI data has landed exactly on forecasts, no change in inflation in October compared to September. The immediate reaction dropped the 10 year note from 4.44% to 4.38% -6 bps and MBS prices increased 14 bps from yesterday. October CPI overall month/month +0.2% as expected, year/year +2.6% as expected and unchanged from September. The core month/month +0.3% as expected and unchanged from September, year/year +3.3% as expected and unchanged from September. The overall CPI at 2.6% increased from 2.4% but was in line with estimates; energy costs declined less (-4.9% versus -6.8%), mainly due to gasoline (-12.2% versus -15.3%) and fuel oil (-20.8% versus -22.4%) while natural gas prices rose 2%, the same as in September. Prices increased for shelter (0.4%), used cars and trucks (2.7%), airline fares (3.2%), medical care (0.4%), and recreation (0.4%). In contrast, prices declined for apparel (-1.5%), communication (-0.6%), and household furnishings and operations.

Another 25 bp rate cut at the December FOMC meeting? It is a moving target driven by key inflation outlooks and readings. Today’s CPI based on CMEs FedWatch Tool rose to 75.7%, from around 62% earlier Wednesday morning before inflation data from the CPI was released at 8:30 am that the Fed would lower the FF rate at the December meeting. After the CPI report, traders were pricing in a 24.3% chance that the Fed will decide next month to keep its benchmark rate at the current target range of 4.5% to 4.75%.

Weekly MBA mortgage applications didn’t decline from the prior week, increasing 0.5% and purchase applications +1.9% from the week before. Re-finances slipped 1.5% to the lowest level since last May.

At 9:30 am the DJIA began +72, NASDAQ +17, S&P +6. 10 year at 9:30 am 4.37% -6 bps. At 9:30 am FNMA 6.0 coupon traded at +30 bps but within 15 minutes the coupon fell back to +17 at 9:45 am.

Nothing left on today’s calendar; there are a few Fed officials on the calendar, but we don’t think anyone will have any impact on the markets today.

Source: TBWS

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