Yield volatility remains muted despite Fed minutes release. Treasury yields were nearly flat in the aftermath of today’s December FOMC meeting minutes release, which highlighted a divided Fed but avoided any surprises. Yields closed within 1 bp of opening levels across the curve after trading in a tight 4 bp range, with the 2-year now at 3.45%, a 1bp decline on the day, and the 10-year up 1bp to 4.12%. Meanwhile, equities declined, with the NASDAQ down 0.24% and the S&P 500 falling 0.14%.
Fed minutes show a divided committee. Fed minutes for the December FOMC meeting, released today, highlighted that this month’s 25bp rate cut was far from a sure bet. Stephen Stanley, chief US economist at Santander US Capital Markets said, “The Committee could easily have gone either way, and the fact that the FOMC eased is clear evidence that Chairman Powell pushed for a cut.” This uncertainty reinforced expectations that the Fed will hold rates in January, with markets currently pricing in just a 15% chance of a cut. However, officials noted that new data could help solidify their outlook, and most still see room for further easing. According to the minutes, “Most participants noted that a move toward a more neutral policy stance would help forestall the possibility of a major deterioration in labor market conditions.”
US house prices unexpectedly rise. The FHFA House Price Index released today, showing home prices in October increased 0.4% on a monthly basis, above expectations of 0.1% and September’s 0.1% decline. On an annual basis, house prices increased by 1.7% in October, with the figures being seasonally adjusted. There are nine geographic census divisions, and today’s report showed home prices fell 0.4% in the East South Central region and increased 1% in the West South Central. Elevated housing prices and mortgage rates have led to subdued buyer demand, with the most recent Bankrate data showing that the current national average on a 30-year fixed-rate mortgage is 6.29%.
