Capital Markets Update
 

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Week of 12/9/24 - 12/16/24

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The U. S. economy is driven by jobs and housing, and last week closed with a robust reading of U.S. labor market growth in November (+227k jobs), rebounding from a weak October reading (revised from +12k to +36k) that was depressed due to strikes and hurricanes. The unemployment rate rose to 4.2 percent, indicative of a labor market that continues to lose momentum gradually as the Fed “attempts to land the plane gently.”

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The expectation is still that the Federal Open Market Committee will cut the federal funds rate by another 25-basis points at its upcoming meeting on December 17–18, however it has become more likely that the central bank will be in a wait and see pattern as the calendar turns to 2025. The bond market rallied on the report, with the 10-year bond yield shedding a couple of basis points to close last week at the lowest level in five weeks.

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This week brings the Consumer Price Index, which, along with consumer spending, will be the last important economic report before the FOMC meeting. Markets will also receive producer prices on Thursday and Treasury will conduct the mini-Refunding over Tuesday to Thursday, consisting of $58 billion 3-year notes, $39 billion reopened 10-years, and $22 billion 30-years.

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No speakers are currently scheduled as the Fed is in blackout ahead of next week’s FOMC decision. However, global markets will digest the latest monetary policy decisions by the RBA tomorrow (no change expected), Bank of Canada on Wednesday (50-basis points cut expected), SNB (50-basis points cut expected), and ECB on Thursday (25-basis points cut expected). Besides Class A tomorrow, Class B 48-hours is on Friday. Today’s economic calendar gets under way later this morning with the Employment Trends Index for November and wholesale inventories and sales for October. We begin the week with Agency MBS prices unchanged from Friday, the 2-year at 4.10, and the 10-year yielding 4.16 after closing Friday at 4.15 percent.

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Commentary by Rob Chrisman