What’s on the agenda for this week?
Mortgage Backed Securities (MBS) Overview
The biggest domestic economic report will be Friday’s Durable Goods Orders which is expected to climb back into positive territory.
We get a large dose of housing data with Existing Home Sales, New Home Sales and the Home Price Index. It will be interesting to see if the New Home Sales improve as there has been a spike in the Home Builders Sentiment Index.
There are no major U.S. Treasury auctions this week.
There is a G20 meeting this week that will be monitored for any new sanctions on Russia.
This week will once again be about international events. Israel has stepped up their offensive (as expected) and so far, the U.S. has done (and can do) nothing to Russia. The bond market will react quickly to any major change in both of these closely watched international events and they will be the driving force in pricing this week.
What happened last week?
MBS Overview – Learn from the Past
MBS gained just +2 basis points (BPS) from last Friday’s close which caused 30 year fixed mortgage rates to move sideways. The best rates were on Thursday and the worst rates on Wednesday.
MBS were on a steady downward trend Monday through Wednesday but had a big rebound on Thursday which reversed the trend and got MBS back into positive territory.
A lot of very important data hit the market. Retail Sales were lighter than expected, PPI (a key measure of inflation) was higher than expected, Housing Starts and Building Permits were lower than expected and so was Industrial Production. Plus we got a double-dose of Fed Chair Janet Yellen as she testified before both the Senate and House last week. The bond market had almost no reaction to her comments though as they were essentially the same as what they have been in terms of what the Fed is looking for out of our economy before the begin to increase their Fed Fund Rate.
There was an increased amount of fear among international traders after the Malaysian passenger plane was shot down over Ukraine and Israel began their ground campaign in Gaza. This caused a “flight to safety” into U.S. bonds and that increased demand for our debt, which drove up bond prices, which in turn drove interest rates back down.