A better start today after soft prices last Friday. The volatility continues; last Thursday MBS prices ended +29, Friday -36 and early today +20 bps. The 10 yr this morning prior to the stock market open at 9:30 AM EST 2.37% -5 bps from Friday. There is no US economic data today except this afternoon with Nov consumer credit data; and little until Friday. Two Fed officials today; Eric Rosengren (Boston) at 9:00 AM and Dennis Lockhart (Atlanta) at 12:40. The better start this morning on some increase in the dollar, weaker crude prices and stock indexes prior to the open a little lower.
Boston Fed’s Rosengren saying three rate hikes in 2017 seems “reasonable”. Rosengren will not vote again on FOMC decisions until 2019 and he dissented in favor of a hike at the September meeting, meaning that he is in the hawkish third of all the FOMC participants (voters and nonvoters).
SF Fed’s John Williams in an interview with the Financial Times said that strong hiring and higher wage inflation, confirmed in Friday’s jobs figures, showed “the stars are aligning” in the US labor market as he signaled support for forecasts of three quarter-point interest rate increases this year. He doesn’t believe there is a need for big fiscal spending now that the economy is moving ahead more rapidly. He said economic policy would be best helped by federal action that ensures a sustainable budget deficit and boosts long-term productivity. He also warned Congress against impinging on the Fed’s ability to set rates by imposing audit requirements or policy rules, amid fresh Republican attempts to clip the central bank’s wings. “If you were to ask me three years ago, four years ago, when unemployment was still high and the economy was still digging out of a hole, I would have said, sure, fiscal policy would be great to help expedite getting back to full employment — short-term fiscal stimulus,” said Mr. Williams in an interview. “But today I don’t think we need short-term fiscal stimulus. What we need is really better policies and investments in the long-term health of the economy.”
Bonds and mortgage prices, although holding nice gains today, are very quiet compared to recent intraday volatility; but it is early. Stock trading, the dollar and crude oil will be the focus today. Zero economic data until late today with consumer credit; while we don’t get estimates breaking down credit our main interest is in the revolving sector of credit (credit cards).
The market action (technicals) has a very slight bullish bias, maybe a better way of saying it; not bearish but not with much of a bullish sentiment. No scheduled data in the US and not much occurring in Europe today. Traders looking forward to Donald Trump’s first press conference on Wednesday.
This Week’s Calendar:
3:00 pm Nov consumer credit ($18.5B from $16.0B in Oct)
6:00 am Dec NFIB Small Business Optimism Index (99.6 from 98.4 in Nov)
10:00 am Nov wholesale inventories (+0.9%)
1:00 pm $24B 3 yr note auction
7:00 am weekly MBA mortgage applications
10:30 am weekly crude oil inventories
1:00 pm $20B 10 yr. note auction (9yrs, and 10 months)
8:30 am weekly jobless claims (255K +20K after declining 28K the previous week)
- Charles Evans (Chicago)
- Harker (Philadelphia Fed)
- Dec export and import prices (exports +0.2%; imports +0.7%)
1:00 pm $12B 30 yr bond auction (29 yrs and 10 months)
1:15 pm Bullard (St. Louis Fed)
7:00 pm Janet Yellen hosts a town hall meeting with educators in Washington, D.C.
8:30 am Dec PPI (+0.3%, ex food and energy +0.1%, ex food, energy and services +0.2%)
- Dec retail sales (+0.7% from +0.1% in Nov; excluding auto sales +0.5% from +0.2% in Nov)
10:00 am U. of Michigan md-month consumer sentiment index (98.6 from 98.2)
- Nov business inventories (+0.6% from -0.2% in Oct)