Posted on December 12, 2016 by Brent Nyitray
|US dollar index
|10 Year Govt Bond Yield
|Current Coupon Fannie Mae TBA
|Current Coupon Ginnie Mae TBA
|30 Year Fixed Rate Mortgage
Markets are flat this morning as oil rallies
. Bonds and MBS are down,
Slow news day with no economic data this morning. The big event this week will be the FOMC meeting on Tuesday and Wednesday. A 25 basis point hike in the Fed Funds rate is baked in the cake – the market will however focus like a laser on the dot plot and how many hikes are expected for 2017.
In terms of economic forecasting, The Fed was almost certainly assigning a 100% probability of Hillary winning in their September forecasts. Trump’s expected policies (especially a big stimulus plan) would probably cause those forecasts to change. If anything, I would expect the Fed to begin moving the dot graph up, which would be bond bearish. That said, we have had a huge sell-off already, so the move has largely been made.
Overseas, Chinese markets got slammed overnight
. The other elephant in the room for the Fed will be the fallout in global markets if China implodes. Luckily, with their capital controls, most of the carnage should be limited to China itself, however any big bust would still have major repercussions for the US dollar, US sovereign debt, and real estate.
Over the weekend, Donald Trump floated Exxon-Mobil CEO Rex Tillerson for Secretary of State, and Texas Governor Rick Perry for DOE. Wouldn’t those choices be better reversed? Donald Trump likes Tillerson because he wants “good negotiators” for the role of State. Separately, Goldman executive Gary Cohn is looking like the nominee
for the National Economic Council.
Filed under: Economy, Federal Reserve, Morning Report |