Doves in Flight

[Andrew Postell]

Markets are trading with a dovish tone today as investors digest overnight headlines and position ahead of key data later this week. The S&P 500 is higher, while Treasury yields have fallen, reflecting expectations for a December Fed cut. Futures pricing suggests a near-certainty of easing, framed as a “risk management” move amid soft labor trends and muted inflation signals. Liquidity remains thin, amplifying intraday volatility.

Mortgages continue to ease, with the current coupon UMBS up 3-4 ticks on the day. This trend aligns with market expectations for Fed policy normalization into 2026. Lock activity has picked up sharply—up 33% month-over-month—as borrowers position for potential rate relief. Refinance appetite is building, though still contingent on sustained rate compression.

Bloomberg reports underscore the political backdrop influencing markets: Trump signaled a Fed Chair pick “early next year,” praising Kevin Hassett as a contender, while geopolitical developments remain fluid with U.S. envoys engaging on Ukraine peace talks. These headlines reinforce the narrative of policy uncertainty and potential leadership shifts at the Fed, adding complexity to rate forecasts. Inflation nowcasts hover near 2.9% YoY, but tariff-driven price pressures and labor softness remain key risks.

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