LEARN FROM THE PAST
Overview
Mortgage backed securities (MBS) gained just 6 basis points from last Friday’s close which caused fixed mortgage rates to move sideways compared to the prior week.
Domestic Flavor
Taking it to the House:
– June New Home Sales were 776K vs. estimates of 700K.
– Weekly Mortgage Applications increased by 4.1%.
– Purchase Applications increased by 2%, Refinance Applications increased by 5%.
– The FHFA Home Price Index actually showed a monthly decrease of -0.3% in May; April was revised lower to just 0.1%.
– June Existing Home Sales had 4.72M units on an annualized basis vs. estimates of 4.78M.
Jobs, Jobs, Jobs: Initial Jobless Claims rose by 1.416M vs. estimates of 1.300M. Continuing Claims dropped to 16.197M vs. estimates of 17.067M. Total Claims for benefits via the Cares Act are just over 31M.
What’s on the Agenda for this Week?
Three Things
The three areas that have the greatest ability to impact backend pricing this week are: (1) Stimulation Nation, (2) The Talking Fed and (3) Domestic Flavor
(1) Stimulation Nation: Today Senate Majority Leader McConnell and Treasury Secretary Mnuchin are releasing all of the details of the Republican Cares 2 Act. So far it looks like a $1T package with another round of $1,200 direct “helicopter money” to citizens and replacing the windfall $600 per week payment to a calculated 70% of the person’s wages. It is also said to include liability protections for businesses and schools. The Democratic House had previously passed a $3.5T package months ago.
(2) The Talking Fed: On Wednesday, the Federal Reserve will issue the latest Interest Rate Decision and Policy Statement, as well as hold a live press conference with Fed Chair Powell. The Fed has widely telegraphed no change to rate policy for the foreseeable future but bonds will be very reactive to any change in language or guidance.
(3) Domestic Flavor: This is a very robust week for big name economic releases. The first look at the 2nd quarter GDP (expected to be a mind-blowing -34%) will take center stage. But Initial Weekly Jobless Claims, Durable Goods Orders, PCE (the Fed’s trigger inflation rate), Chicago PMI, Consumer Confidence and Consumer Sentiment will also garner attention from bond traders.
Market Wrap-up
Domestic Flavor
Manufacturing: The June Durable Goods Orders was in line with expectations (7.3% vs. estimates of 7.2%); when you strip out Transportation, they were up 3.3% vs. estimates of 3.5%.
On Deck for Tomorrow: FOMC meetings begin, Case-Shiller Home Price Index, Consumer Confidence, Richmond Fed Manufacturing and the 7 year Treasury note auction.