Morning Report: Janet Yellen speaks at 10:00 am

Vital Statistics:

	Last	Change
S&P Futures	2173.0	0.0
Eurostoxx Index	342.0	0.0
Oil (WTI)	47.4	0.1
US dollar index	85.6	0.1
10 Year Govt Bond Yield	1.56%
Current Coupon Fannie Mae TBA	103.3
Current Coupon Ginnie Mae TBA	104.2
30 Year Fixed Rate Mortgage	3.5

Markets are in a holding pattern ahead of Janet Yellen's speech in Jackson Hole today. Bonds and MBS are flat

Janet Yellen will give a speech today at 10:00 am, discussing the tools in the Fed's monetary policy toolkit. Speeches at Jackson Hole are generally not market-moving, however the markets have been adjusting ahead of this one. Expect to hear Yellen push for fiscal policy to improve the economy. 

The markets are now assigning a 33% chance of a rate hike in September. Somewhat hawkish Fed-speak out of different Fed heads largely accounts for the increase. The Fed Funds futures markets are also assigning a 58% chance of a hike through December.

GDP came in at 1.1% in the second quarter, which was a downward revision from the first estimate of 1.2%. The price index was up 2.3% on a year-over-year basis, which was a little hotter than expected. 

Corporate profits fell 2.2% in the second quarter. Tough to reconcile a near-record stock market with falling profits. Something has to give. 

For all the talk in Washington about the need for more infrastructure spending, states are beginning to take advantage of low interest rates to issue bonds to raise money for infrastructure spending. When municipalities can borrow money for 30 years at 2.23%, it is kind of a no-brainer. Both Donald Trump and Hillary Clinton are talking about increasing infrastructure spending, so it looks like we will probably have something out of DC next year as well.