November 1, 2018

Stocks are moving higher in the AM, bouncing skyward after President Trump said that “Those discussions are moving along nicely” in reference to the U.S./China trade negotiations. The S&P500 looks to be notching its third consecutive increase after erasing most of its YTD gains in October.  Apple Inc. is set to report earnings after the bell today, so keep a close eye on the reaction throughout the FAANG securities and technology sector.  The S&P500 is currently trading at 2,728.97, 0.64% higher.

Treasuries are little changed to begin Thursday’s exchange as investors digest a slew of economic data.  October’s ISM Manufacturing release is causing a bit of anxiety on the street as investors weigh the impacts tariffs have had on raw material inputs.  The US 10-YR Note is trading about 8 bps higher than its close on 10/26, with the 2/10 year spread widening to a little over 2bps.  The US 10-YR Note is currently trading at 3.1530%, 0.0095 higher.

MBS Performance and Volumes

MBS closed mixed on Wednesday, as Treasury yields continued to move higher.  The up-in-coupon bias in 30-year performance remained intact, as lower coupon Fannies and Ginnie IIs lagged the 10-year note by 2/32s while fuller coupons tracked 10s or modestly outperformed.  15-year Fannies mostly outperformed the 5-year note by a tick, although Dwarf 4s lagged the Treasury note by 1/32.  Trading activity was robust, with $249 billion in total volume, although spec pool activity remained muted at less than $10 billion.

TBA MBS’ are churning sideways to begin Thursday’s trading session, holding steady despite a rally in equities.  All eyes will be on tomorrow’s October Nonfarm Payrolls report after a strong surge in private payrolls was reported on Wednesday.  Currently, Bloomberg is expecting 200K jobs added, and an unemployment rate of 3.7%.  Liquid coupons are trading 2 tics lower.

The USD is peeling off a 16-month high in the AM, depreciating most notably against the GBP and EUR.  The BOE signaled a heightened pace of rate hikes in the future, bolstering sterling’s allure.  The DXY is currently trading at 96.38, 0.75% lower.

Oil is moving lower in the early morning shuffle as US inventories continue to rise.  WTI is hovering near a two-month low, and currently trading at 65.11, 0.31% lower.