What’s on the Agenda for this Week?
It is another holiday-shortened session this week with the bond market closing early on Thursday and closed on Friday. Unlike last week, this week is a very light economic calendar.
The three areas that have the greatest ability to impact backend pricing this week are: 1) End of Year, 2) PMIs and 3) Geopolitical.
(1) End of Year: 2020 is about to be kicked to the curb and everyone is ready for that. While it has been rife with political, economic and pandemic turmoil, it has been a banner year for housing and mortgages. With another holiday shortened week, combined with the end of the year, there are typically some bond purchases as stock traders make some moves out of stocks (usually to sell and book some losses for tax purposes but the problem is everything is up LOL).
(2) PMIs: This is a light week for economic data but the bellwether Chicago PMI will take center stage. There will also be PMI data out of China this week.
Brexit: The European side has voted on and approved their final, final package and it will be voted on by the U.K. this week.
Stimulation Nation: President Trump has gone ahead and signed the $900B Bill over the weekend. The overall impact of that Bill on economic growth in the short term is relatively muted given the overall size of the package. In the meantime, the House is said to vote today (which may or may not actually happen) on increasing the $600 check to $2,000. The Senate may take it up for a vote after that but there is a lot of resistance for the increase in the Senate.
Here is this week’s Treasury Auction schedule:
12/28: 2 year and 5 year notes
12/29: 7 year note
Treasury Dump: There were two shorter term Treasury note auctions today. The 2-year note auction was strong with a record offering of $58 billion. It went off at a high yield of 0.137% and a bid-to-cover ratio of 2.45. The 5-year note auction saw $59 billion go off at 0.394%. The bid-to-cover ratio was 2.39.
On Deck for Tomorrow: Case-Shiller Home Price Index, 7-year Treasury note auction.