Good morning, everyone. We’re seeing some market turbulence this morning, primarily influenced by comments from Richmond Fed President Thomas Barkin. Mortgage bonds are down by 15 basis points, and the 10-year Treasury briefly hit 4% before backing off. Barkin’s hawkish remarks suggested that more Fed rate hikes are on the table, depending on incoming data. This stance was less bond-market-friendly, leading to a rise in yields and a dip in mortgage-backed securities. However, some recent data has helped stabilize things.
Fed Minutes and Market Reactions
Later today, we anticipate releasing the Fed minutes at 2:00 PM Eastern Time. These are from the pivotal December 13 meeting, where the Fed shifted from a hawkish to a dovish stance. The market will keenly observe any mood shifts among Fed members, indicating a consensus move towards a more dovish policy.
Economic Data Impact
Today’s economic data includes the JOLTS report for November. While job openings slightly decreased, the trend throughout 2022 has consistently declined. This aligns with other indicators of economic softening, such as a drop in hiring rates and voluntary quits, suggesting less labor market dynamism.
Megan pointed out that leisure and hospitality, a key driver of job growth, showed a notable decrease in job openings. This sector’s slowdown could be indicative of broader labor market trends.
The ISM manufacturing index also came weak, remaining in contraction for 14 months straight. Notably, the prices paid component, an inflationary measure, declined significantly, which could bode well for future inflation readings.
Mortgage application data showed decreased purchases and refinances, with rates hovering around 6 and 3/4 percent.
Jobs Data and Market Outlook
Looking ahead, this week is crucial with significant jobs data. We have the ADP report forecasting 115,000 job creations, and the BLS jobs report is expected to show 168,000 job creations, with a slight uptick in unemployment. These figures will be crucial in shaping market expectations and the Fed’s response.
Chart Analysis: Mortgage-Backed Securities and Treasury Yields
Currently, mortgage-backed securities are down, but we’re waiting until Friday’s job numbers. The 10-year Treasury fluctuates around 3.98% to 4%, facing resistance from multiple levels, including the 200-day moving average and Fibonacci levels. Today’s Fed minutes could be a significant market mover, so we’re maintaining a floating stance until more data comes in.
Wishing everyone a great day as we navigate these market dynamics. Stay tuned for more updates.
