January 27, 2023
Over in bond land, Treasuries are weakening ahead of the opening bell Friday as investors look towards today’s inflation report. The Personal Consumption Expenditure (PCE) Deflator Price Index, which is the Federal Reserve’s (Fed) preferred proxy for inflation, is expected to show prices rose 5% year-over-year in December, easing from the prior month’s 5.5% clip, while the core PCE Deflator (which excludes the more volatile food and energy prices) is forecasted to ease to 4.4% year-over-year from November’s 4.7% annual gain. On a monthly basis, analysts anticipate the headline PCE deflator to show no change in December while the core PCE deflator is expected to accelerate to 0.3% month-over-month from the prior month’s 0.2% pace. Investors will parse through the report for any clues as to what the Fed’s future course of monetary policy will look like. The central bank is scheduled to announce its next policy move on February 1, and analysts anticipate they may downshift to a 25 basis point (0.25%) rate hike. The yield on the benchmark 10-year note is advancing seven basis points (0.07%) to 3.56%, while the 30-year bond yield is climbing five basis points (0.05%) to 3.68%. The yield on the more policy-sensitive two-year note is up three basis points (0.03%) to 4.22%. Yesterday, the U.S. preliminary fourth-quarter gross domestic product (GDP) reading showed the economy grew at a faster-than-forecasted 2.9% pace, demonstrating continued resilience in the economy. However, the personal consumption component of the report painted a more downbeat picture, coming in at 2.1%, a slower pace than expected. The core PCE price index eased in the fourth quarter to 3.9% from 4.7%. Treasuries weakened, with the yield on the 10-year note up four basis points (0.04%) to 3.49%, while the 30-year bond yield climbed three basis points (0.03%) to 3.63%. The yield on the two-year note advanced six basis points (0.06%) to 4.19%. Rounding out today’s data docket will be December updates on personal income and personal spending, as well as pending home sales. The University of Michigan is slated to release a final January update for their Consumer Sentiment Index.
Mortgage rates ticked lower for the week ending January 26, adding support to homebuyer demand. The average 30-year fixed rate mortgage fell two basis points (0.2%) to 6.13% versus 3.55% a year ago and compared to a record low of 2.65% set in January 2021. The 15-year rate declined 11 basis points (0.11%) to 5.17%, in contrast to the 2.80% level at this time last year.
Municipal Market Commentary
The Bloomberg 30-day visible supply fell $473 million to $4.144 billion on Thursday, below the 12-month average of $9.418 billion.
This information is obtained from sources and data considered to be reliable, but its accuracy and completeness is not guaranteed by Wells Fargo Advisors. Additional information available by request.
Wells Fargo Advisors is registered with the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, but is not licensed or registered with any financial services regulatory authority outside of the U.S. Non-U.S. residents who maintain U.S.-based financial services account(s) with Wells Fargo Advisors may not be afforded certain protections conferred by legislation and regulations in their country of residence in respect of any investments, investment transactions or communications made with Wells Fargo Advisors.
Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.