November 6, 2018

Rates are flat this morning as markets prepare for the midterm election results.  Any volatility will likely occur overnight.  Choosing to lock today is not a bad idea…

Stocks are moving higher to begin Tuesday’s trading session as traders prepare for the results of the US midterm elections.  Current polls are pointing to a Democratic House of Representatives, which could hinder the speed of the legislation process going forward.  Since President Trump was elected, the S&P500 has rallied 28%, and is currently trading at 2,746.49, 0.30% higher.

Treasuries are little changed in the AM after churning in place in Monday’s session.  All eyes will be on the midterm US election results, and the FOMC policy announcement this Thursday.  Currently, Democrats are forecasted to take the House, while Republicans are projected to remain in control in the Senate.   Additionally, Bloomberg has the odds of a rate hike on Thursday pegged at 10.6%.  Also, the UST is set to issue $27 billion worth of 10Yr notes today, and $19 billion 30Yr bonds on Wednesday.  The US 10-YR Note is currently trading at 3.2028%, 0.0020 higher.

TBA MBS’ are essentially unchanged in the early morning shuffle as investors hit pause in front of the US midterm election results.  Last week, FNCL/G2SF 4.5’s lost 17 and 14 tics respectively as debt markets grappled with a stronger-than-expected Nonfarm Payrolls report and a deluge of supply with the Fed ceasing the purchasing of MBS.  Liquid coupons are trading 1 – 1+ tics higher.

The USD is going nowhere fast in the AM, falling notably against the EUR and GBP, and gaining against the JPY.  Political developments surrounding Brexit and Italy continue to steer currency allocations overseas.  The DXY is currently trading at 96.29, 0.06% lower.

Oil is hovering near a seven month low as supply fears ease.  WTI is currently trading at 62.94, 0.25% lower.