All Things in Moderation

Vital Statistics:

Stocks are flattish this morning on no real news. Bonds and MBS are down.

The upcoming week won’t have much in the way of market-moving data, however we will get a lot of housing data, with the NAHB Housing Market Index, housing starts, and existing home sales. We won’t have any Fed-speak as we are in the quiet period ahead of next week’s FOMC meeting. Earnings season begins in earnest with most of the banks reporting.

ICE and Black Knight have agreed to sell Optimal Blue to Constellation Software in an effort to get regulatory approval for their merger. Constellation Software is already buying Empower, and will purchase OB for $700 million paid for in $200 MM cash and a $500MM promissory note

Morgan Stanley is out with a call saying they expect yields to work their way lower. “We maintain a bullish stance on government bond duration and expect yields to trend lower. Stubbornly hawkish central bank rhetoric remains the biggest impediment to a larger bond market rally, but could provide dip-buying opportunities in preparation for a rhetorical policy pivot,” Morgan Stanley stated. PIMCO is out with a similar call, saying the bond market offers “equity-like” potential with bond market volatility.

Speaking of bond market volatility, we are seeing bond market volatility fall to the bottom of the range associated with the current Fed tightening policy. Falling bond market volatility will go a long way towards reducing MBS spreads which will help push down mortgage rates.

The Empire State Manufacturing Index expanded last month, although optimism remains subdued. Price pressures continue to abate, which is good news for the Fed.

Filed under: Economy |