Weekly Mortgage Overview: 10/18/2021

By October 18, 2021Mortgage Overview

What Happened Last Week?

MBS Recap

Bonds may have rallied on Monday to Thursday, but Friday’s theme was quite different. Right from the start of the overnight session, yields began slogging steadily higher. When Europe came online, losses accelerated, but the pace was still modest overall. Then on Friday morning, the surprisingly strong Retail Sales data added to the pace of the weakness. To be clear though, the data is nothing but a supporting actor in the broader drama starring a steady decline in Covid case counts, persistent inflation concerns, and an increasingly hawkish Federal Reserve.

Source: Matthew Graham, Mortgage News Daily 10/15/21)

What’s on the Agenda for this Week?

Three Things:

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

(1) The Talking Fed: The next FOMC meeting is just a couple of weeks away, where the bond market is expecting an official taper announcement. Wednesday’s Beige Book is prepared specifically in advance of that meeting and will be utilized by the Committee in their evaluation of the economy and their policy. Several key members will also speak this week:

10/18: Neel Kashkari, Randall Quarles
10/19: Michelle Bowman, Christopher Waller, Mary Daly, Patrick Harker, Raphael Bostic
10/20: Randall Quarles, Charles Evans, James Bullard
10/21: Fed’s Balance Sheet

(2) Central Bank Palooza: There will be an interest rate decision out of the People’s Bank of China, specifically in light of the financial meltdown due to Evergrande’s defaults. But the Bank of England is getting a lot of attention after BoE governor Bailey said over the weekend that the central bank “will have to act” on inflation.

(3) Manufacturing: There are some key readings this week with the Philly Fed and the flash Makit PMIs.

Market Wrap-up

Domestic Flavor

Taking it the House: The October NAHB Housing Market Index increased by 4 points to 80 which beat out forecasts of 76.0. Any reading above 50 is positive.

On Deck for Tomorrow: Housing Starts and Building Permits