What Happened Last Week?
Bonds Hold Their Ground After Weaker Data
Wednesday’s CPI data was akin to some passionate political orator making a case for the country to go to war against low rates. Yesterday’s 30-year bond auction stepped in with a “not so fast” counterpoint, and Friday’s Retail Sales data gives traders hope that cooler heads will prevail. Bottom line, as of Friday, last week’s drama looks to have given way to the same old trading range that’s been intact since April 7th.
What‘s on the Agenda for this Week?
The three areas that have the greatest ability to impact mortgage backed securities pricing this week are: (1) The Talking Fed, (2) Geo-Political and (3) Domestic Flavor.
(1) The Talking Fed: The Minutes from the last FOMC meeting will be issued on Wednesday. The bond market will be very sensitive to any mention/discussion of tapering and we will hear from a few key figures of the Fed to see if they lighten up on their non-stop message in report after report after report that keeps building the case for inflation is only “transitory”.
Across the Pond, the markets will continue to pay close attention to Israel/Palestine as the potential for escalation and spillover could disrupt much of the region and beyond.
Covid in Asia is a big concern; reopening in Great Britain is underway while the EU is dysfunctional and a cause for concern with vaccine rollouts, etc.
(3) Domestic Flavor:
There will be a lot of housing related news this week but the focus will be on Manufacturing (Empire, Philly Fed and Flash PMIs) as well as Jobless Claims.
Biden’s infrastructure plan looks to be pared down but making slow progress while his other additional $2T plan is in the spotlight. On the Jobs front, more states have joined in to stop the Federal unemployment stipend but 39 million households are set to get $250 to $300 per child per month.
The 20-year Treasury Bond Auction will be on May 19.
Manufacturing: The May NY Empire Manufacturing Index was hotter than expected with a 24.3 vs. 23.9 estimate.
Taking it to the House: May NAHB Housing Market Index remained at a very lofty level of 83.
On Deck for Tomorrow: Housing Starts and Building Permits.