New Home Sales Skyrocket Though Mortgage Markets Barely Change
Mixed economic data and a proposed tax increase caused little reaction. Overall, it was a quiet week for mortgage-backed securities (MBS).
Accounting for 10% of the real estate market, this past week saw new home sales skyrocket. In March 2021, new home sales jumped 21% from February. As a result, new home sales hit their highest level since 2006.
In general, the pace of both new and existing sales is being dictated by the supply of homes available each month. Overall, new home sales posted enormous gains.Continue reading
Source: mbsquoteline.com 4-23-21
What’s on the Agenda for this Week?
Last week was devoid of any economic data, but not this week! This is a monster week in terms of data, Fed action and more.
The three areas that have the greatest ability to impact MBS pricing this week are: (1) Central Bank Palooza, (2) Domestic Flavor and (3) Political.
(1) Central Bank Palooza: Key interest rate decisions will be released from the Bank of Japan and the Federal Reserve. The Fed of course will take center stage this week. While the market does not expect any real change in policy or guidance, a subtle change in just a few words will have bond traders speculating as to their timeline to begin tapering (yes it will happen at some point) and increasing their key Fed fund rate (that will eventually happen too but much further out than a taper).
(2) Domestic Flavor: There is a ton of big-name domestic economic data that have the gravitas to move MBS pricing this week. 1st quarter GDP, PCE (Fed’s key measure of inflation), Chicago PMI, and Consumer Confidence will get the most attention from traders.
(3) Political: Covid numbers (over 1 million new cases in India over the weekend) and Biden’s first address to Congress this week where he will discuss a bevy of spending programs and tax increases to pay for them will continue to garner market attention.
Here is this week’s Treasury auction schedule:
04/26: 3-year and 5-year notes
04/27: 7-year note
Manufacturing: March Headline Durable Goods Orders missed the mark, gaining only 0.5% MOM vs. estimates of 2.5%. But when you strip out the volatile Transportation sector, it matched expectations with a 1.6% reading.
Treasury Dump: There were two auctions today. Both the 2-year and 5-year note auction were well received which placated concerns over tomorrow’s more important 7-year note auction.
On Deck for Tomorrow
Bank of Japan Interest Rate Decision, Case Shiller Home Price Index, FHFA Housing Price Index, Richmond Fed Manufacturing, Consumer Confidence, 7 year Note Auction, FOMC begins two days of meetings.