Does The Fed Still Matter?

Bonds sold off overnight as the reality of Trump’s victory became apparent.  Traders more or less nailed the trading levels right out of the gate.  This didn’t leave much room for volatility during domestic hours (10yr yields started the day around 4.45 and are ending around 4.43).  Given the all-consuming focus on the election, it would be easy to overlook the fact that Thursday brings the next Fed announcement (it would normally be on a Wednesday, but some smart person pushed it back a day). Does that even matter in this environment?  Frankly, probably not too much.  At the very least, the market is 100% prepared for a 0.25% rate cut.  The statement and Powell will both likely acknowledge improvements in economic data–especially the big shift in NFP–while at the same time reminding the market that the Fed is playing a long game and not to read too much into one month of data.

Econ Data / Events

S&P Services PMI

55.0 vs 55.3 f’cast, 55.2 prev

ISM Services

56.0 vs 53.8 f’cast, 54.9 prev
employment 54.0 vs 48.0
Prices 58.1 vs 58.0

Market Movement Recap

08:11 AM Sharply weaker following Trump victory.  MBS down 5/8ths of a point.  10yr up 16bps at 4.44

01:06 PM Recovering a bit, both before and after 30yr auction.  MBS down half a point and 10yr up 13.6bps at 4.418

02:27 PM Giving up some ground again.  MBS down 17 ticks (.53) and 10yr up 16bps at 4.442

04:11 PM Leveling off into the last hour.  MBS down 15 ticks (.47) and 10yr up 15bps at 4.434