A calmer day for markets

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Published Date 8/7/2024

Treasury rates began higher again this morning, at 8 am ET the 10 year note at 3.93% +4 bp, the 2 year 4.00% +1 bp.

As expected, weekly MBA mortgage applications improved last week. The composite +6.9% from the week before, purchase apps up 0.8% after declining 1.5% the week before, re-finances got a nice boost +15.9% after falling 7.2%. Last week saw the lowest 10 year note yield this year although this week it has crept higher. Re-finances were 59% better than a year ago, purchase apps -11% from a year ago.

After the shocking decline in the July employment data last Friday US and global financial markets hit the panic button. As is the routine when markets are hit with surprises a lot of talk ensued, there were a number of comments floated in the media that the Fed should cut rates immediately by 50 bps and not wait for the September FOMC meeting, conjecture that the Fed needs to drop the FF rate by 150 bps. It wouldn’t happen, the last thing markets and the Fed need is to panic. By now though, the idea of an inter-meeting rate cut has dissipated. 50 bps still in the cards for the September FOMC meeting, it depends on data between now and the 18th of September.

This afternoon at 1 pm Treasury will auction $42B of new 10 year notes, the demand will get a lot of attention. While we don’t put much emphasis on yesterday’s 3 year auction it met with decent demand.

Yesterday the NY Fed’s report on the consumer, not good with increasing debt using credit cards. This afternoon at 3 pm June consumer credit data from the Federal Reserve Board of Governors, overall credit expected +$10B down from $11.3B in May. Our focus is on the revolving credit, credit cards, as a measure of consumer spending.

At 9:30 am the DJIA opened +224, NASDAQ +289, S&P +63. 10 year at 9:30 am 3.94% +4 bp. FNMA 5.5 30 year coupon at 9:30 am -4 bps from yesterday’s close and -25 bps from 9:30 am yesterday.

Investors and traders still reacting to the weak employment report. The financial markets remain in corrective patterns. The questions of the day now, is the Fed late in lowering rates and is the US headed for a recession? It is likely the volatility in rates and stock indexes will continue until markets get more specific news and the only data this week is tomorrow with weekly jobless claims. This week’s calendar doesn’t have much. Next week CPI, PPI, retail sales and the University of Michigan consumer sentiment index.

Source: TBWS

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