monthly macro monitor

key trends for the agency mbs investor
September 2024

  • September marked a pivotal month in monetary policy as the Federal Reserve lowered the target range for the federal funds rate by 50 basis points in its first rate cut since 2020, based upon data consistently indicating that the risks to the labor market and inflation have moved into better balance.
  • Chair Powell also continued to emphasize that the FOMC is “not on any preset course” and that its monetary policy decisions will be made on a meeting-by-meeting basis after assessing incoming economic data.
  • Nevertheless, the beginning of a highly anticipated easing cycle has been welcomed by market participants, who are now pricing in a high probability of three additional rate cuts by year-end, compared to the two rate cuts implied by the Fed’s median “dot plot” expectation.
  • Against this backdrop, benchmark interest rates and interest rate volatility declined, the yield curve continued to steepen, and current coupon Agency MBS spreads to blended 5- and 10-year swap and Treasury rates tightened moderately over the course of the month.

Key Rate and Spread trends

Important Disclosures
Federal funds rate data last updated September 30, 2024. Source: Federal Reserve.

Economic data last updated September 30, 2024. Core CPI and Core PCE exclude food and energy. Source: Bureau of Labor Statistics and Bureau of Economic Analysis.

Current coupon Agency MBS reflects the 30-year current coupon Agency MBS yield. Agency MBS spread to U.S. Treasuries and Agency MBS spread to swaps reflect the 30-year current coupon Agency MBS yield spread to a 50/50 average of 5- and 10-year U.S. Treasury yields and a 50/50 average of 5- and 10-year SOFR OIS swaps, respectively. MOVE Index reflects the ICE BofA Move Index. Each chart is shown over the trailing 12 months ended September 30, 2024, and each monthly change reflects the difference between September 2024 month-end data and August 2024 month-end data. Source: Bloomberg.

Data and commentary is provided for information purposes only and should not be construed as investment advice.

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