Rates continue to drift higher as its been all sellers in the bond market to start the holiday-shortened week. The yield on the US 10yr note is up to 4.26% while the current coupon UMBS contract is down about 14 tics on the day. Unfortunately, not a lot of data on the economic calendar to drive markets until the next CPI print later this month, which comes during the Fed’s blackout period right before the September rate announcement on Sep 20th. We expect the Fed to hold rates steady at this meeting. There is no policy announcement in October, while rate moves at the November and Decembers meetings are completely data dependent – right now the market is pricing in just a 40% chance of a rate hike at the November meeting. For now, I would remain defensive as rates are likely to remain elevated before the aforementioned September events.
Commentary by Jeremy Collett, EVP, Head of Capital Markets for GRA
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