Weekly Mortgage Overview: 10/13/2021

What Happened Last Week?

What’s Up With Super Weak NFP Tanking The Bond Market?!

Non-Farm Payrolls (NFP) were much weaker than expected (194k vs 500k forecast). At almost any other moment in history, this would be grounds for sharp bond rally. Indeed, it looked like we might get a little love in the first few minutes following the data, but then things changed. Yields ultimately hit the highest levels in months and MBS tanked hard. It’s important to remember that it would have taken an even weaker report to derail the Fed’s taper timeline. Moreover, Friday’s losses weren’t really as “big” as they were “surprising.” Either way, the trend is not good for a variety of reasons unrelated to the data. Bottom line, the jobs report didn’t do anything to stand in the way of what was already going on.

Source: Matthew Graham, Mortgage News Daily 10/8/21

What’s on the Agenda for this Week?

Domestic Flavor

Taking it to the House: Weekly Mortgage Applications were flat at 0.2%. Purchases increased by 2.0% and Refinance applications fell by 1.0%.

The Talking Fed

The Minutes from the last FOMC meeting are released today. Vice Chair Richard Clarida says that in his opinion, they have now met their inflationary test to start to adjust rate policy but he is not among the majority.

Treasury Dump

There is a very important 30-year Treasury bond auction today.

Market Wrap-up

Domestic Flavor

Taking it to the House: Weekly Mortgage Applications were flat at 0.2%. Purchases increased by 2.0% and Refinance applications fell by 1.0%.

Inflation Nation: The September headline Consumer Price Index (CPI) increased by 5.4% on a YOY basis vs. estimates of 5.3%. On a MOM basis, it increased by 0.4% vs. estimates of 0.3%. Core CPI (ex food and energy) increased by 4.0% on a YOY basis which matched expectations. MOM, it was up 0.2% vs. estimates of 0.1%. The Atlanta Fed District’s Inflation Expectations remained at 3.1% for a year out while businesses reported a 3.5% increase in their cost growth on average.

On Deck for Tomorrow: PPI, Initial Jobless Claims and Continuing Jobless Claims.

The Fed

The Minutes from the last FOMC meeting were issued. target=”_blank” You can read the official Minutes here.

The most notable content is that it appears that:

They favored a path that features monthly reductions in the pace of asset purchases, by $10 billion in the case of Treasury securities and $5 billion in the case of agency mortgage-backed securities (MBS).

No decision to proceed with a moderation of asset purchases was made at the meeting, but participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate.

Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December.

Several participants indicated that they preferred to proceed with a more rapid moderation of purchases than described in the illustrative examples.

Treasury Dump: There was a 30-year Treasury bond auction today. $24B went off at a high yield of 2.049% and had a solid level of demand with the bid-to-cover ratio of 2.36.