Market UpdateOct 17 2013
As everybody is probably well aware by now, Congress passed the debt and budget deal last night and Obama signed it just after midnight, averting a potentially crippling US debt default. Since the release, the bond market has been all bid as the media focuses in on the growth implications of the shutdown and the likelihood that Fed tapering is now off the table for at least 8 months. The thinking being that Q4 economic growth will be severely impacted by the shutdown. This morning, for example, eBay lowered their sales forecasts as consumer spending has already dropped off in front of the holiday season. It’s likely the slowdown will impact economic data in throughout the first quarter of 2014 and the Fed will not attempt to taper while Yellen transitions into her new role as Fed Chairwoman. It’s been all buying in mortgages as Fannie 3.5s are up 20/32nds and testing 102-handle dollar prices once again. 10 years are trading well with the yield at 2.58%.