Stocks are trending lower to begin Thursday’s exchange, led lower by consumer discretionary, healthcare, and consumer staples. A plethora of events have been weighing on investor psyche as of late including, the Italian budget struggle, Brexit, and a precipitous drop in oil. The S&P500 is currently trading at 2,682.32, 0.68% lower.
Treasuries are moving higher in the AM as investors digest the latest rhetoric stemming from the US Central Bank. During a Q&A in Dallas yesterday, Jerome Powell expressed confidence in the economy stating, “I’m very happy about the state of the economy now,” and “Our policy is part of the reason why our economy is in such a good place right now.” Bloomberg currently has the odds of a rate hike in December pegged at 70.8%. The US 10-YR Note is currently trading at 3.0848%, 0.0402 lower.
MBS Performance and Volumes
MBS ended a volatile session outperforming their Treasury hedge ratios. 30-year Fannies ended the day 2-4 ticks ahead of the 10-year Treasury, duration-adjusted, with FN 4.5s having the strongest session. Ginnie IIs performed similarly, with GNII 3.5s through 4.5s outpacing 10s by 3/323s while GNII 3s outperformed by 4 ticks. 15-years had a tougher time relative to the 5-year note, which was the best performer on the Treasury curve; while Dwarf 4s outperformed the 5-year by 2/32s, other coupons either tracked 5s or outperformed by a tick. Trading was fairly active, with FINRA reporting $310.7 billion in total trades, including $21.3 billion in specified pool activity.
TBA MBS’ are off to a strong start on Thursday, despite a round of stronger-than-expected economic data. Retail sales came in at a 0.8% MoM increase for the month of October versus estimates of a 0.5% gain. Additionally, initial jobless claims remained strong at 216K. Liquid coupons are currently trading 4 tics higher.
The USD is gaining in the AM, appreciating most notably against the GBP as Brexit worries remain at the forefront of investor attention. The DXY is currently trading at 97.16, 0.18% higher.
Oil is moving higher in the early morning exchange, piggybacking off of a bounce higher in yesterday’s session. WTI crude remains firmly in a bear market, and is currently trading at 57.03, 1.39% higher.