What’s on the Agenda for this Week?
This week’s economic data will be largely ignored once again as the Three Things will drive pricing. Wednesday afternoon could get very choppy depending on what the Fed says; and of course at any time this week if there is an agreement on the next round of Stimulus, MBS pricing could deteriorate.
The three areas that have the greatest ability to impact backend pricing this week are: (1) Stimulation Nation, (2) Central Bank Palooza and (3) Geopolitical.
(1) Stimulation Nation: While the vaccine is rolling out, the markets continue to “hope” for another round of stimulus in the $908B to $916B range as well as a spending bill to fund the government.
(2) Central Bank Palooza: There will be news from four major central banks this week: Swiss National Bank, Bank of England, Bank of Japan and our own Federal Reserve Bank. The latter will get the most attention. While a rate change is not expected, they will issue their economic projections and the famous “dot plot chart” which maps out future rate changes among other things. The bond market will be very reactive to any policy change in their asset purchase plans, including changing the maturity times of what they are purchasing.
(3): Geopolitical: Brexit continues to drag on and add to the economic uncertainty of Europe and Great Britain. Domestically, the Electoral Votes will be officially cast today but won’t become officially approved by Congress until January 6th. The Georgia Senate runoff is by far the most important factor in policy outlook for 2021. The financial markets (both bonds and stocks) prefer a Biden Presidency but a Republican majority in the Senate.
There were no domestic reports today
On Deck for Tomorrow
Import and Export Prices, Industrial Production and Capacity Utilization, FOMC starts two days of meetings.