Good Morning on this best day of the week, Wednesday,

No data out today…

Although the Bank of New Zealand did cut another 50bps in their meeting (on top of the 50bp cut they took at the last meeting). Today we get a 10-yr auction which did not go well and the minutes from the recent FOMC meeting which should be out in about 30minutes.

From Bloomberg:

And since this was the start of the rate cut cycle, and since they went 50 basis points, I would imagine there will be a fair amount of interest in what the minutes have to say.

Of course, the big news this week is going to come tomorrow (Thursday) when we get the September CPI report. For a while there, it seemed like we could just pay attention to the labor data. But with that shockingly strong September jobs report putting a few doubts into the continuation of the cycle, we should probably keep paying attention to what’s going on on the inflation side.

In the meantime… things still look strong.

Yesterday we got the Atlanta Fed’s latest GDP Nowcast for Q3, and it’s still tracking growth over 3%.

It all just adds to the weirdness of this whole cycle, which I would summarize like this:

On the one hand, it seems odd to be cutting at all, with growth as robust as it is, and unemployment as low as it is. On the other hand, the Fed is clearly trying to do something ahistorical, which is start the cutting cycle ahead of the curve, and not wait until a downturn is obvious before going into easing mode.

The Fed speak has still been on the side of 25bp cuts, but markets are pushing the yields higher.

We are very oversold at this point, and I would have to expect a bounce in our favor but only if CPI comes in tame tomorrow. The 10-yr is at 4.07% and it’s a little uncomfortable. Not surprisingly, loan applications tanked last week. Sometimes we have weeks (or months or years) like this. I am confident it will turn around… sometime

Stay safe and make today great!