Markets calm ahead of Thursday’s inflation news

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Published Date 2/28/2024

Yesterday MBS prices were essentially unchanged, the 10 +2 bps, MBS prices -3 bps. This morning the 10 started down 2 bps, MBS prices opened 5 bps points better than yesterday. There hasn’t been any compelling news that generated enough interest to break the tight ranges. Tomorrow is the day, January PCE inflation, Mr. Powell’s preferred inflation gauge, that will set the next direction, January month/month overall expected to have increased to 0.3% from 0.2% in December, the core month/month expected +0.4% from 0.2%. Year/year overall PCE 2.4% from +2.6%, and year/year core 2.8% from 2.9%.

Mortgage applications fell again last week, the composite -5.6% from the prior week; purchase applications -4.5% while re-finance apps declined 7.3%. The week before last mortgage apps declined 10.6%, purchases -10.15, refinances -11.4%.

The second look at Q4 GDP this morning revised from +3.3% to 3.2%, the annual rate of personal expenditures revised from 2.8% to 3.0%.

The January advance look at the US trade deficit expected -$88.1B reported at -$90.2B, month/month imports +1.1% from +1.5%, exports +0.2% from +2.5%.

Yesterday the February consumer confidence index was reported lower after a six month increase in confidence. Confidence has improved considerably since late last year thanks to slowing inflation, but it’s still well below the pre-pandemic high. The six month out index declined to 79.8 from 81.5 in January. Consumers fretting over the coming mud-slinging election and continuing high food costs that the Fed prefers to ignore when measuring inflation.

At 9:30 am ET the DJIA opened -183, NASDAQ began -63, S&P -15. 10 year note yield at 9:30 am unchanged at 4.30%. FNMA 6.0 30 year coupon at 9:30 am +6 bps from yesterday’s close and +4 bps from 9:30 am yesterday.

Nothing left on the calendar today, there are three Fed officials on the calendar but not likely to say anything that will alter what the Fed has been saying for weeks.

Source: TBWS

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