Weekly Mortgage Overview: 5/24/2021

What Happened Last Week?

Stronger Data Proves No Match for the Sideways Grind

Bonds have done a good job of clearing hurdles of various sizes over the past 2 weeks. Last week’s inflation data presented the biggest recent risk, but this week’s Fed Minutes also raised some concerns. This morning’s example came courtesy of a much stronger Markit Services PMI reading, but it was no match for the well-entrenched range trade in longer term yields. 10-year Treasuries briefly hit their highs of the day, but then settled in to the same sideways-to-slightly-stronger pattern seen last week.

Source: Matthew Graham, Mortgage News Daily 5/21/21

What‘s on the Agenda for This Week?

Three Things

The three areas that have the greatest ability to impact backend pricing this week are: (1) Inflation Nation, (2) The Talking Fed and (3) Central Bank Palooza.

(1) Inflation Nation: The Fed has all but ignored all of the inflationary data over the past month for two reasons, none of it is their key measure of inflation and well…it’s all “transitory” anyway. But on Friday will be their key measure of inflation with the Core (ex-food and energy) PCE YOY reading which is expected to be well above 2%. This is the most important release of the week.

(2) The Talking Fed: A bunch of voting members will sepak this week as they approach their media “blackout” period where members do not speak about policy leading up to the next FOMC meeting.

05/24: Brainard, Mester, Bostic, George
05/25: Quarles
05/26: Quarles
05/27: Fed’s Balance Sheet

(3) Central Bank Palooza: Key interest rate decisions will be issued from the Bank of Indonesia, Bank of Korea and the Reserve Bank of New Zealand.

Treasury Dump

Here is this week’s Treasury auction schedule:

05/25: 2-year note
05/26: 5-year note
05/27 7-year note