Market Snapshot Tuesday June 11, 2019

hot weather

Good Morning on this fantastic Tuesday,

 

This morning the 10-year yield is 2 bps higher around 2.16%. The yield was steady during Monday. The 10-year yield continues to trade around levels from September 2017 but has broken above a 2.14% ceiling in place during June. MBS is down 3 bps this morning after worsening by 9 bps yesterday. Mortgage rates have returned to levels in late May and previously late March of this year. Markets have priced in an 80% chance of Fed rate reduction in July, a 90% chance of a September Fed rate reduction and about 60% chance of three rate reductions accumulating up to 75 bps this year. The Administration continues to pressure the Fed for rate reductions.

 

Today the producer-price index was released and indicated continued low inflation pressure. The PPI increased 0.1% in May and the core PPI, excluding food and energy, increased 0.2%. Both met economists forecast reflective of slower inflation and economic growth. The consumer price index will be released tomorrow.

 

Stocks are the reason for the recent weakness in bonds. Until the party in the equity markets is over, bonds are going to stagnate, I still see the 10-yr drooping below 2% but it may be a bit longer. Hang tough, I suspect we’re not too far off.

 

Make today great!