Weekly Mortgage Overview: 8/9/2021

By August 10, 2021Mortgage Overview

What Happened Last Week?

Bigger Picture Bounce Becomes Bigger Risk, but Not the Only Risk

Friday’s strong jobs report certainly deserves some credit for increasing the risk that the Fed considers an earlier tapering timeline (as early as the September meeting). But “another similar report” isn’t a given. Ample uncertainty remains due to the current Covid spike, and seasonally abnormal employment patterns being viewed through the lens of normal seasonal adjustments.

Source: Matthew Graham, Mortgage News Daily 8/6/2021

What’s on the Agenda for This Week?

Three Things

The three areas that have the greatest ability to impact mortgage backed securities (MBS) pricing this week are: (1) Inflation Nation, (2) The Talking Fed and (3) Treasury Dump.

(1) Inflation Nation: We get several major inflation data points this week with the focus on CPI (core expected to be 4.3%), PPI (core expected to be 5.6%) and Import Prices. The higher these readings are, the worse it is for MBS pricing.

(2) The Talking Fed: Several Federal Reserve members speak this week and the markets are very keen to hear what they have to say about growth and inflation, and will try to use their commentary to hedge their bets on the timing of an eventual decrease in the level of their monthly MBS purchases.

08/09: Bostic, Barkin and former NY Fed Pres Dudley
08/10: Evans
08/11: Bostic, George, Atlanta Fed Business Inflation
08/12: Fed’s Balance Sheet

(3) Treasury Dump: There is a large amount of debt that will be dumped into the marketplace with Thursday’s 30-year Treasury Bond auction having the most weight for MBS trades.

08/10: 3-year note
08/11: 10-year note
08/12: 30-year bond

Market Wrap-up

Domestic Flavor

Jobs, Jobs, Jobs: The June Job Openings and Labor Turnover Survey (JOLTS) set a new record high with 10.073M unfilled Jobs vs. est. of 9.281M. This means that there are over 1.4M more jobs available then there are people that are Unemployed (based upon Friday’s jobs report).

On Deck for Tomorrow: Non Farm Productivity and Unit Labor Costs, 3 year Treasury note auction.

The Talking Fed

Atlanta Fed President Raphael Bostic seemed to have a little more “hawkish” tone from what we have been hearing from other Fed speakers. He stressed that the economy is improving faster than their model predicted and urged moving forward with the taper, arguing that they can always adjust the taper back if needed.