Markets expect a volatile week with lots of inflation data

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Published Date 4/8/2024

Last Friday the employment report shocked with the unexpected big increase in jobs. The result pushed the 10 year note up 8 bps to its 4 month high and MBS prices down 25 bps. Markets unwinding the potential cut in June. This morning the 10 year note continues to increase to another new recent high, at 8:30 am ET the note at 4.46% +5 more and FNMA 6.0 30 year coupon down another 23 bps.

Until a week ago there was still some conviction the Fed would reduce rates three times this year beginning in June, for the moment that is gone, now traders have reduced expectations for just two cuts and little chance of a cut in June with inflation still running hot, presently the first cut not expected until September FOMC with March employment picking up steam. Inflation data on Wednesday with CPI and Thursday PPI.

There are no data points today, but the calendar is headlined with inflation data and Treasury will auction a total of $124B of 3s, 10s, and 30s.

The tone this morning is bleak, news media adding fuel commenting that the 10 year note could be headed to 5.00%. Fed officials from Powell to regional Fed presidents, and Fed governors have put the breaks on rate cuts, saying the Fed isn’t in a hurry to make any. The market is unwinding the view cuts are coming soon.

At 9:30 am the DJIA opened +12, NASDAQ +40, S&P +6. 10 year note 4.43% +4 bps (down from 4.46% earlier). FNMA 6.0 30 year coupon at 9:30 am -12 bps from Friday’s close and -22 bp from 9:30 am Friday.

The near term technicals all bearish; the 10 trading above its 20, 40 and 200 day averages. This week has a real potential of volatility with inflation data, FOMC minutes and treasury auctions. Already this morning we are seeing it, the 10 started at 4.46%, at 10 am 4.42%.

This Week’s Economic Calendar:

Tuesday:

NFIB small business optimism index (89.9 from 89.4), $58B 3 year note auction.

Wednesday:

Weekly MBA mortgage apps, March CPI (core month/month +0.3% from +0.4%), $39B 10 year note auction, FOMC minutes from the March meeting, March Treasury budget statement (-$ 340B).

Thursday:

PPI (month/month core +0.2% from +0.3%%), weekly jobless claims (215K from 221K), $27B 30 year bond auction.

Friday:

Mid-month University of Michigan consumer sentiment index (79.0 from 79.4 in March), March import prices month/month +0.3% unchanged from February, month/month +0.3% from +0.8% in February.

Source: TBWS

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