Good Morning on this fantastic Thursday,
Looking back to yesterday, the Fed meeting minutes were released which in today’s climate, will move markets. Federal Reserve officials agreed last month on the need to eventually dial back the pace of interest-rate hikes but also wanted to gauge how their monetary tightening was working toward curbing US inflation. Reading between the lines, rates hikes are going to slow and phase out. “As the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation,” according to minutes of the Federal Open Market Committee’s July 26-27 meeting released Wednesday in Washington. “Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the committee could tighten the stance of policy by more than necessary to restore price stability,” the minutes showed. Maybe not a leap into rate cutting but certainly bond friendly.
Today, jobless claims were flat.
Leading economic indicators still negative but not as bad as expected. Existing home sales tanked again (this is not as bad in my mind as others think, as it will pick up quickly once rates drop), and Philly Fed was anemic but at least not negative again. Mortgage bonds had a nasty and irrational gap down this morning. This move firmly tested the support level and luckily bounced up from that level. We are now trying to close the gap, and I think we will succeed. The ten-year is more stable and appears to be nearing a level of resistance from which I believe we will fall. To translate, unless we get some unexpected and unfriendly bond news, I expect rates to improve over the next few days.
Please remain safe and healthy, make today great.