August 26th, 2022 - Market Update
Current position: Carefully Floating
Stocks are mixed and Mortgage Bonds are lower to start the day.
The Fed's favorite measure of inflation, Personal Consumption Expenditures (PCE), showed that inflation fell 0.1% in July, which was in line with expectations. The year over year reading fell from 6.8% to 6.3%, which was higher than the 6.2% expected.
The core rate, which strips out food and energy prices, rose by 0.1%, lowering the year over year change from 4.8% to 4.6%.
Atlanta Fed President Raphael Bostic appeared on CNBC this morning saying that he hopes to get to "Restrictive" policy by year end, which he defined as a Fed Funds rate in the 3.5%-3.7% range.
Bostic noted that he's comfortable holding rates at a restrictive level for awhile and that it’s premature to think about cutting rates.
Next week is “Jobs week”, which means we will receive the ADP and BLS Jobs Reports on Wednesday and Friday respectively. On Tuesday, we'll be receiving fresh looks at appreciation, with the Case-Shiller Home Price Index and FHFA House Price Index.
Mortgage Bonds continue to trade in a wide range between support at 99.28 and overhead resistance at the 50-day Moving Average. While trading in a wide range like this we'll need to be on guard for price swings.
Powell may change things when he speaks at 10am this morning. We're expecting him to continue to talk tough on inflation, which should calm the bond market.
The 10-year was rejected from overhead resistance at 3.10% yesterday and is currently trading with this level acting as a ceiling and the psychological 3.0% level as a floor. Begin the day carefully floating
Source: MBS Highway
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