October 29, 2018

Stocks opened higher to start the week as prices attempt to rebound from Friday’s decline.
A broad rally across all sectors this morning is helping the major indexes chip away at their losses for the month. The S&P 500 is currently trading at 2,697.02, 1.45% higher with Financial and Information Technology leading the broader market higher.

Treasuries opened slightly lower and have spent the morning session near their opening levels as investors look to a risk-on approach in response to the opening rally in stocks. The 10-YR Note is currently trading at 3.114%, 0.035 higher.

Personal Income increased 0.2% in September while spending jumped 0.4%.  The PCE Price Index was up 0.1% while the core PCE Price Index (excludes food and energy) increased 0.2%.  The PCE price inflation decelerated to 2.0% year-over-year from 2.2% in August.  These are on par with what the FED is expecting and they have not moved enough to warrant the FED to alter its rate path course.

MBS Performance and Volumes

MBS lagged the rally in Treasuries again on Friday in moderately busy trading.  30-year Fannies underperformed their 10-year hedge ratios by 2-4 ticks, with fuller coupons (4.5s and 5s) having the shakiest session, trailing 10s by 3 and 4 ticks, respectively.  30-year Ginnie IIs mostly underperformed the 10-year, although their performance was skewed to up-in-coupon, as GNII 5s actually outperformed 10s.  15-year Fannies underperformed the 5-year note by 2-4 ticks, with lower coupons having the best outing.  FINRA reported total trading volumes at $217 billion, including just under $10 billion in spec pools.