Inflation Remains In Check, Congress Is Gone, And Rates Are Flat

No change in the rate markets this morning. However, at 5:30 am EST, the 10 yr ran up to 1.95%. At 9:00 am 1.93% unchanged from yesterday. MBS prices at 9:00 am EST -3 bps from yesterday.

Q3 final GDP 2.1% as expected, consumer spending increased from 2.9% to 3.2%, the price index +1.8% a little stronger than 1.7% expected. Q3 was driven by consumers, while manufacturing weakened. There wasn’t any noticeable reaction to the 8:30 am EST report. Stock indexes in futures trading continue to rise, the DJIA +64, but the NASDAQ and S&P were slightly lower.

Congress is gone now, but not before adding more tension to the impeachment process. Pelosi didn’t deliver the case to the Senate, adding more delay to what House Democrats who’ve argued for months that President Donald Trump’s impeachment was a matter of urgent national interest. “I’m not sure what leverage there is in refraining from sending us something we do not want,” McConnell (Senate Majority leader) said on the Senate floor. If Democrats never send over the articles of impeachment, he said, that’s “fine with me.”

Trade: China and the United States are in touch over the signing of their Phase 1 trade deal, China’s commerce ministry said, which will see lower U.S. tariffs on Chinese goods and higher Chinese purchases of U.S. farm, energy, and manufactured goods.

At 10:00 am EST two key data points: Nov. personal income and spending, income expected +0.3%, spending +0.4%. Income reported +0.5%, spending +0.4%. PCE price index expected +0.1% was +0.2%, yr/yr +1.5% as expected; core PCE +0.1% on thoughts of +0.2%, yr/yr as expected +1.6%.

Also, at 10:00 am EST, the final Dec. University of Michigan consumer sentiment index was thought to be unchanged from two weeks ago at 99.2; the index increased to 99.3%.

We are coming to the end of the year, and we don’t expect interest rates will increase much in the next two weeks. Trading will be thin in the bond and mortgage markets. The stock market is on fire, as with the bond market, trading will be light and driven by economic and geopolitical news. Congress has left the building, and impeachment looks as if it won’t be delivered to the Senate until the middle of January with Dems refusing to deliver the charges to the Senate, further delaying the inevitable. Recent surveys confirm most Americans are now less interested in impeachment.

Source: TBWS