Rising Stock prices coupled with added Treasury supply are pushing Mortgage Bond prices lower today.
On Capitol Hill, new Fed Chair Janet Yellen has stated that the Federal Reserve is likely to reduce the pace of asset purchases in further measured steps if labor market conditions and inflation continue to improve.
Wholesale inventories rose +0.5% in November offset by a 1% rise in sales. The stock to sales ratio fell to 1.17 from the prior three month’s readings of 1.18. December’s inventories are expected to come in flat with sales falling to +0.7%. Yellen’s first semi-annual monetary policy testimony is today at 7:00 AM PST. The curve has bear steepened with 2s10s up 3 bps.
Let me emphasize that I expect a great deal of continuity in the (Fed's) approach to monetary policy.
I will continue to recommend a locking stance in the short term, which is measured in a few days to a few weeks. If anything changes. I will get back to you.
