Weekly Mortgage Overview: 12/30/2013

We have another holiday-shortened week.  The bond market will close at 2:00EST on Tuesday and will not reopen until Thursday.

Tuesday’s Chicago PMI report will be very key as it will give a general idea on how Thursday’s ISM Manufacturing Index may turn out. A strong reading in both of those reports would be negative for pricing. And with the much better than expected Durable Goods Orders, Business Inventories and Wholesale Inventories over the past couple of weeks, it can be inferred that the manufacturing data this week will be strong.

We will get a nice dose of housing data with Pending Home Sales and the Case-Shiller Home Price Index. The market is expecting an increase in new contracts for existing homes and continued increases in home values. Consumer Confidence will also be very key as will the weekly shot of Initial Jobless Claims.

There are no major U.S. Treasury auctions this week.

MBS are making a run back to the 10-day moving average which should help with some better pricing in early trading. But that 10-day resistance line has held for the entire month of December. So from a technical perspective, the “upside” is limited. Even if trading begins above that resistance level, it is not expected to close above it unless we get a dismal Pending Home Sales report. For the rest of the week, it will depend on the economic data. There have been good trends in manufacturing and it is difficult to see a reason why that would change this week. And if that is the case, then downward pressure on MBS may resume this week.

What is on the agenda for this week?