Last week -71, the week before -54, the week before that – 49….get the picture? Yes there was a brief reprieve on Friday but is that the end of the bond route or simply a pause?

Two Things

The two areas that have the greatest ability to impact backend pricing this week are: (1) Stimulation Nation, and (2) The Talking Fed.

(1) Stimulation Nation: The House passed their version of the budget on Saturday and Speaker Pelosi famously left the $15 minimum wage provision in. However, the Senate (despite a big push from Majority Leader Schumer) has seemingly agreed to pass on the $15 minimum wage provision since a couple Democratic senators will not support it and therefore doom the entire budget. But those are the headlines, and the reality (because that can certainly change again) is what the bond market will focus on as the Senate reconciles with the House budget. The timing and final language/dollars are very key.

(2) The Talking Fed: We are in the middle of the second largest deterioration in bonds in recent history. Will the Fed be forced to step up to the plate and agree to purchase more bonds? After all, there are true market forces working There will be a lot of key speeches by voting members this week, and while the main topic of their speeches might not be related to bonds/rates/economy, they certainly have the ability to put in their two cents worth if they want. Here is this week’s schedule:

03/01: John Williams, Lael Brainard, Raphael Bostic
03/02: Lael Brainard, Mary Daly
03/03: Patrick Harker, Raphael Bostic, Charles Evans, Robert Kaplan, Fed Beige Book
03/04 Fed Chair Powell

Market Wrap-up

Domestic Flavor

Manufacturing: The February ISM Manufacturing PMI was very strong, breaking 60 with a 60.8 reading – beating the forecasts of 58.8. Prices Paid showed inflationary pressure with an 86.0 reading and employment picked up with the Employment Index hitting 54.4 vs. estimates of 53.3.

Construction Spending: January Construction Spending was double the market expectations (1.7% vs. estimates of 0.8%).

On Deck for Tomorrow: There are no economic releases scheduled for Tuesday