Good Monday AM,
No economic data today but the line up for the week is heavy (heavy).
Calendar below. Any day from tomorrow on brings volatility with Wednesday and Friday (the FOMC meeting and the jobs report) being potentially the most treacherous. For the moment, as markets do leading into a heavy week, they are consolidating. No one is expecting the Fed to raise rates on Wednesday but the commentary, especially considering the strong data last week (GDP and PCE), will be closely watched. Bonds are fading a bit with the 10-yr backed up to 4.90% and mortgage bonds off their lows of the say but still down 13bps.
The Conference Board releases its Consumer Confidence Index for October.
The Institute for Supply Management releases the Chicago Business Barometer for October.
The Federal Open Market Committee announces its monetary-policy decision.
The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey for September.
The ISM releases its Manufacturing Purchasing Managers’ Index for October.
ADP releases its National Employment Report for September.
The BLS releases the jobs report for October.
The ISM releases its Services PMI for October.
Some commentary from around…
The Federal Reserve’s flurry of interest rate hikes since March 2022 have taken a toll on home buyers, pushing the typical mortgage rate above 8%, a level not seen since 2000. On Wednesday, the Fed is set to make another interest rate decision that could impact the home loan market. The central bank is expected to hold rates steady at its November 1 meeting, according to economists surveyed by FactSet. That comes as credit cards are now charging the highest interest rates on record, and many home buyers have been priced out of the real estate market due to loan costs. A pause on rate hikes could provide a backstop against higher borrowing costs, yet it might not immediately translate into lower mortgage rates, according to financial experts. That’s partly because mortgage rate hikes don’t always mirror the Fed’s rate increases, but rather tend to track the yield on the 10-year U.S. Treasury note, which recently hit a 16-year high.
Since Federal Reserve officials last raised interest rates in July, the economy is doing two things that central bankers don’t think it can sustain much longer: revving up activity and at the same time slowing inflation. It has set off a debate within the central bank about how closely it should follow its traditional models of the economy. The debate is unlikely to affect the outcome of its meeting this week, when the Fed is set to hold its short-term benchmark interest rate steady. But it could affect what happens next, Nick Timiraos writes.
Many see the swift rise in long-term interest rates over the past month as having effectively substituted for Fed rate rises. But for now, officials are likely to keep the door open to another hike in December or beyond. Whether they walk through that door depends on incoming data on inflation and growth.
What is behind the swift run-up in long-term Treasury yields—to around 5% from 4% in early August? There is evidence it is driven primarily by the rise in the so-called term premium, or the extra compensation that investors demand for holding longer-dated investments. Some economists say that is worth two or three Fed rate hikes.
Please remain safe and stay healthy, make to day great!