An unexpected increase in weekly jobless claims is fueling a bid for Treasuries this morning despite yields initially being higher overnight on increased hopes of a stimulus deal before the week is over. Initial jobless claims rose to 885,000 last week, the highest level in three months and 67,000 more than expected. Housing data continues to surpass expectations, and the November housing starts report was no exception. Starts were up 1.2% on the month (0.3% expected), and building permits, which are a more forward-looking metric, rose 6.2% versus expectations of a 1% gain.

There were no real surprises from the Fed yesterday. The only change in the official statement was an enhancement to the guidance for the pace of asset purchases, adding that the purchases will continue “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.” The Fed had telegraphed this move in the minutes of the November 5 FOMC meeting, and they chose not to use any of the remaining dry powder at this meeting, including extending the duration of purchases. In the updated SEP, the median fed funds projection was unchanged (no increase through 2023), although the number of participants forecasting a rate increase in 2023 rose to five (four at September meeting).

Jason Haley
Chief Investment Officer