A series of positive catalysts boosted U.S. equities on Thursday ahead of today’s payroll figures. Senator Chuck Schumer shared on the Senate floor that a deal had been reached for a short-term debt limit extension to avoid a government default. The DJIA closed up 337.95 to 34754.94 and the S&P rose 36.21 to 4399.76. Technology and energy stocks both saw a boost over 1%, despite treasury yields increasing and commodity prices falling. Global fears of a shortage of natural gas were tamped down with Russian President Vladimir Putin noting Moscow would be willing to help supply to Europe. Focus now shifts to today’s nonfarm payroll figures which may be an indicator of timing in the Fed’s tapering of bond purchases.

Mortgages ended Thursday’s session mixed versus their treasury hedges, as the benchmark 10-year yield rose 5 basis points to 1.57%. The risk on sentiment in equities saw 10y treasury yields reach recent highs. UMBS30 2.0%-2.5%s ended tighter by 1 tick (1/32nd), and 3% wider by a tick. Prepayment data released on Wednesday indicated slower than expected speeds, however rolls ended the session slightly cheaper ahead of October Class A net out. UMBS30 2.5% prices finished the day down 6/32nd to 102-28 and UMBS15 2.0% fell 2/32nd to 102-28+. The Fed Desk will round out their week of purchases with a max of $5.4B today, in UMBS30 and GNIIs.

From Elliot Eisenberg, the Bowtie Economist: Inflationary Interest – Since the inflation we are experiencing appears likely to linger somewhat longer, calling it transitory may no longer be justified. Rather, what about ephemeral? Expansionary monetary policy is coming to an end and will become contractionary by late 2022. Similarly, fiscal policy has become contractionary, and starting in 21Q2, began reducing GDP by 2.5%/annum, the most contractionary stance in decades. The contractionary trajectory extends into the foreseeable future.