This is a huge week for economic data with some big-time reports that have the gravitas to really cause some swings in pricing. But the biggest event of the week is clearly Wednesday’s Federal Open Market Committee (FOMC) release of their policy statement. It is likely that they will announce another reduction in the pace of their monthly purchases of Treasuries and mortgage backed securities. The only question is the amount of the taper. The economic data (including the miss in the NFP) is not enough to alter their own economic projections, and their decision to taper further is more based on their outlook and not on the past. Also, the bond market has actually improved since their December meeting, which clearly gives them permission to taper again since their concern is rising rates…and rates didn’t rise, they improved.
01/28 – 2-year note
01/30 – 5-year note and 7-year note
This morning’s New Home Sales is expected to pull back from 464K to 457K…not a major move and therefore probably not a major factor in pricing as it is too small a component of our overall economy.