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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Trade Balance: The October total Goods and Services Trade Balance was -$78.2.B vs est of -$79.1B but it was much larger than September’s level of -$73.28B as exports fell to lowest level since June.
Central Bank Palooza: The Reserve Bank of Australia increased their main interest rate by 25BPS which was widely expected.
Interest rates across the curve increased yesterday, the 10 yr. +11 bps, the 2 yr. +15 bps. FOMC next Thursday, and the stronger ISM services sector along with technically overbought conditions pushed yields higher after improving for two weeks. MBSs yesterday down 66 bps. This morning some improvement, 10 yr. down 5 bps, MBSs started just 8 bps better at 8:30 am ET. Stock index futures early this morning generally flat after strong selling yesterday.
There aren’t any data points today that will directly influence interest rates. At 8:30 am the October US trade deficit was expected at -$80.0B, as reported -$78.2B.
Jamie Dimon, Chase saying while consumers and companies are currently in good shape, that may not last much longer; “Inflation is eroding everything, and that trillion and a half dollars ($1.5 trillion in excess savings from pandemic) will run out sometime mid-year next year,” Dimon said. It “may very well derail the economy and cause a mild or hard recession that people worry about.” Meanwhile Goldman Sachs did a survey, investors overseeing a total of $5 trillion are loading up on bets that a recession can be avoided, betting the Fed will kill inflation sooner than expected; that idea is optimistic given the Nov employment report (more jobs and higher wages) and yesterday’s strong ISM services sector index. The takeaway: lots of talk and surveys presently built on sand. Betting on treasuries at these yields assumes the economy will worsen and cause the Fed to let up.
Next week’s FOMC meeting will keep interest rates from declining, as the time approaches traders will ease back on risk and investors not likely to load up on new equity buys. Consensus is 50 bp increases, that is completely discounted in current rate levels. At the meeting, the Fed’s quarterly forecasts for employment, inflation and GDP will be released. On Friday, this week Nov PPI is expected to +0.2% m/m, the same as October; yr./yr. +7.2% from +8.0% in October. The core PPI +0.2% up from 0.0% in October, yr./yr. +5.9% from 6.7%. The estimates, achieved, good news showing inflation is easing. Inflation over the past three months has been working lower, still well above 2.0% though that the Fed is targeting.
