Market Snapshot July 11, 2019
Good Morning on this fantastic Thursday.
Happy Thursday 7/11! This morning the 10-year yield is 1.5 bps higher around 2.075% after core inflation data increased higher than forecast. The yield had moved above 2.10% yesterday but fell back during the day after comments from Fed Chair Powell supported the case for an interest rate cut later this month based on stagnant inflation. The yield is at the level of June 18th and continues to trend from September 2017. MBS is worse by 3 bps from yesterday morning and mortgage rates are maintaining levels since mid-June and previous level from September 2017.
Powell spoke yesterday before the House Financial Services Committee and stated the Fed will act as appropriate to sustain economic expansion. Minutes from the last Fed meeting released yesterday showed strong discussions regarding a rate reduction. Fed market futures continue to price a 100% chance of .25 bps rate reduction from the Fed this month. Powell will speak before the Senate Banking Committee today and investors will be watching for comments regarding the inflation data released today.
Consumer Price index increased 0.1% last month exceeding forecast of no change. The key market driver was the core inflation, excluding food and energy, increased 0.3%, largest increase in 1.5 years. The annual increased was 2.1% versus 2.0% last month. Hourly wages have increased 1.5% annually.
At this point, I have to capitulate somewhat and say that we are (until additional data or commentary to the contrary, allowing us to regain the bullish momentum) likely in a neutral or bearish pattern. I don’t think we stay here long but I do see us here for a week or two.
Make today great!