Weekly Mortgage Overview: 2/24/2014

By February 24, 2014Mortgage Overview

MORTGAGE BACKED SECURITIES (MBS) OVERVIEW

There are no major economic reports today but we do have a very interesting week ahead of us with Treasury auctions, Talking Feds and some big-name economic releases.

THE WEEK’S BIGGEST EVENTS

Consumer Confidence: This is the first important data point of the week. The market is expecting a reading of 80.3. Historically, this is a pretty high reading but last time out it hit 80.7. A reading above 80.5 will pressure bonds. The market will discount a weaker reading due to the weather but a reading below 72.0 will certainly help MBS pricing.

Durable Goods: This is a very important reading. Last time out this was a huge disappointment with a reading of -4.3%, which was followed by a big-time miss with Non-Farm Payroll. The market is expecting just a small pull back of -0.5%. If we get a reading above +1.0% then MBS will get hammered.

Janet Yellen: She will finally have her second big testimony in D.C. This time it is with the Senate Banking committee which had to be rescheduled due to the weather. MBS sold off in direct reaction to her prepared statements and testimony in front of the House. There is no reason to think that she will change her testimony or her message. And that is likely to remind the markets that the Fed will be tapering further and this will once again provide pressure on MBS.

GDP: We get the second release of the 4th QTR GDP and the market is expecting it to be revised downward from 3.2 to 2.7. If it stays above 3.0% this will provide pressure on pricing. If it drops below 2.5%, then MBS will rally.

Chicago PMI: Both the Empire and Philly Manufacturing readings have been very weak. The Chicago PMI report will provide a better understanding if those are isolated areas or if it is more of a nationwide slowdown. A reading below 55 is needed to see an improvement in pricing.

Consumer Sentiment Index: This is expected to be in the 81.5 range. A reading above 82 will pressure pricing and a reading of 80 or below will help pricing.

Treasury Auctions This Week:
02/25: 2-Year Note
02/26: 5-Year Note
02/27: 7-Year Note