Markets start the day under mild pressure

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Published Date 6/26/2024

In a rather unusual move late yesterday after sitting flat all session rates increased from 4 pm ET to 5 pm. At 4 pm the 10 year note yield 4.23%, at 5 pm 4.25%, MBS price at 4 pm -1 bp, at 5 pm -7 bps. The delayed reaction to more comments from Michelle Bowman, Fed governor, that rates may stay higher for longer (she spoke at 2:15 pm). Lisa Cook, another Fed governor said potential rate cuts in the future, but timing is uncertain. The likelihood of a 25 bp Fed rate cut by September is currently at 64%, down from 68% earlier in the week.

Waiting for inflation data on Friday, yesterday the June consumer confidence index presented a mixed picture. The confidence index expected at 100.0 hit at 100.4, May confidence revised from 102.0 to 101.3. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased to 141.5 from 140.8 last month. the Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 73.0 in June, down from 74.9 in May. The Expectations Index has been below 80 (the threshold which usually signals a recession ahead) for five consecutive months.

This morning weekly MBA mortgage applications increased 0.8% from the prior week, the third consecutive expansion in mortgage applications to mark a 17.5% increase since the start of the month. Mortgage demand is the highest since January and the second highest in one year. Purchase apps edged higher by 1.2%. refinance apps were -0.1% from the prior week.

At 9:30 am the DJIA opened -174, NASDAQ -13, S&P -14. 10 year note 4.30% +5 bps. FNMA 6.0 30 year coupon -14 bps from yesterday’s close and -15 bps from 9:30 am yesterday.

At 10 am May new home sales were expected at 650K from 634K in April; the range of estimates 622K to 666K. Sales reported at 619K, but April sales were revised higher to 698K from 634K. Sales down 11.3% from April.

At 1 pm Treasury will auction $70B of 5 year notes. Yesterday’s 2 year auction was decent but not as strong as recent treasury borrowing.

Tomorrow weekly jobless claims (236K from 238K); May durable goods orders (0.0% from +0.6%); May pending home sales (+1.9% from -7.7% in April); $44B 7 year note auction. Friday PCE, consumer income and spending, University of Michigan consumer sentiment index, June Chicago purchasing managers index.

Source: TBWS

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