Weekly Mortgage Overview: 12/2/2013

Today is first real trading day since Wednesday and bond traders are back in full force. The first thing they will do is take out any funds that they “parked” in the safety of bonds back to work, and that means some initial downward pressure on pricing that isn’t due to any data.

The week started off -24BPS due to the above and to manufacturing strength in Europe. The European PMI readings (apart from Spain) were stronger than expected. Any global or domestic economic growth is negative for MBS pricing. 

ISM Manufacturing was much stronger than expected with a reading of 57.3 vs. market expectations of 55.0.  A reading above 50 shows expansion…so this is a really hot reading and therefore really negative for pricing this morning.

There is a double dose of Construction Spending with both September and October results. September disappointed but October was much stronger than expected and is negative for MBS pricing.

While there are no major Treasury auctions this week, there are a ton of big name economic reports that will really shape the trading channel for the next couple of weeks. Reports this week include: ISM Servicing, the 2nd revision to the 3rd quarter GDP data, ADP private Payrolls, and Friday’s Non-Farm Payrolls.  While there is plenty of other economic news, these reports will guide the markets.

The markets will also be focusing on the streaming Retail Sales data for the all-important holiday shopping season. So far, the data hasn’t been great but we live in a different world now and sales at the cash register are no longer a good indicator of consumer spending with more and more of consumer spending being done online. 

There is a very interesting trend with some good strength in manufacturing and consumer sentiment. If this bears out in the Non-Farm Payroll data, then MBS will see  another “leg down” in pricing.

What is on the agenda for this week?