Suggestions that can change during the day: Mortgage Bond prices are flat, being capped by a sharp rise in inflation from the U.K. Carefully floating is recommended.
After close Commentary: Not much movement in the MBS markets today as prices seemed to be capped by the inflation warnings from the U.K. and Fed Chair Yellen. The Fannie Mae 30-yr 3.5% coupon closed unchanged at 103.03. Stocks closed mixed but the Dow did hit the 23K mark before ending below that level. The Dow gained 40.48 points to end the session at 22,997.44, a fresh record high close. The S&P 500 gained 1.72 points to 2,559.36, while the NASDAQ closed near unchanged at 6,623.65. WTI oil settled at $51.88/barrel, near unchanged. 10-yr T Note yield 2.30%. Housing Starts and Building Permits will be released tomorrow morning. The Fed's Beige Book is due out at 2:00 p.m. ET.
Late morning Commentary: Homebuilder sentiment pushed higher in October as builders rebounded from the initial shock of the hurricanes. The NAHB Housing Market Index rose 4 points in October to 68, above the 64 expected and up from 64 in September. The report showed that the component gauging current sales conditions rose 5 points to 75 and the index measuring sales expectations in the next six months increased 5 points to 78. Meanwhile, the component measuring buyer traffic ticked up a single point to 48. “It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer,” said NAHB Chief Economist Robert Dietz.
U.S. Stocks closed at record high levels yesterday. The Dow closed at 22,956.96; S&P 500 at 2,557.64; while the tech-heavy NASDAQ closed at 6,624.00. The new mantra for Stocks, "buy high and sell higher." Equities can't continue this blistering pace, there has to be some sort of correction. The S&P is currently trading near unchanged this morning while the Dow hit 23,000 for the first time ever.
The United Kingdom (U.K.) Consumer Price Index hit 3% in September, the highest since March 2012. This is important to watch as low inflation around the globe has been a major tailwind for higher Bond prices and lower yields for a long time. The rise in U.K. inflation comes after Fed Chair Yellen said on Sunday that she expects inflation to bounce back soon. At the moment, the Core Personal Consumption Expenditure, the Fed's favorite inflation gauge, is running at 1.3% year over year, way below the 2% the Fed is looking for. So, persistently low inflation here in the U.S. remains a "mystery" and is a major reason why long-term Bond yields are so low.
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