What to Expect From Fed Day

Markets can see the changes in inflation data and traders are eager to refine their understanding of how the Fed will balance those changes against their determination to avoid mistakes of the past (i.e. easing policy too soon after a big inflation battle).  We expect Powell to remind the market yet again about erring on the side of caution while a strong labor market affords the opportunity employ restrictive policy with minimal fallout.

Econ Data / Events

Employment Costs

1.0 vs 1.1 f’cast, 1.2 prev

Q4 wages/salaries

1.0 vs 1.3 f’cast/prev

FHFA Home Prices

-0.1 vs 0.0 f’cast

Chicago PMI

44.3 vs 45.0 f’cast, 45.1 prev

Consumer Confidence 

107.1 vs 109.0 f’cast, 109.0 prev

Market Movement Recap

08:34 AM Sideways to slightly stronger overnight.  Some selling heading into 8:30am econ data, but gains afterward.  10yr down almost 4bps at 3.505.  MBS up 6 ticks (.19).

09:51 AM Choppy, illiquid weakness in MBS, still up 6 ticks (.19) on the day, back near highs after being down 6 ticks (.19) a moment ago. 10yr down 3.3bps at 3.509.

11:51 AM bounce back in the past hour after falling to ‘unchanged’ levels just after 10am.  Currently up an eighth.  10yr down 2.6bps at 3.516.

02:27 PM MBS up to best levels of the afternoon with 5.0 and 4.5 coupons both up 5 ticks (.16) on the day.  10s are down 3.3bps at 3.518.