What Happened Last Week?
Why in the World Did Bonds Rally So Much on Friday?
Bonds embarked on a surprisingly swift move in a surprising direction following a resoundingly solid jobs report. Such rallies often demand that justification be pieced together from whatever happened to be available in hindsight. In Friday’s case, the bigger pieces included some combination of massive short covering sparked by another round of British central bank headlines.Source: Matthew Graham, Mortgage News Daily 11/5/21)
What’s on the Agenda for this Week?
Overview
This is a holiday-shortened week as the bond market is closed on Thursday in observance of Veteran’s Day.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Inflation Nation, (2) The Talking Fed and (3) Treasury Dump.
(1) Inflation Nation: There are two very key readings this week with PPI and CPI. Headline Consumer Prices YOY are expected to rise at 5.3% and Producer Prices YOY are expected to rise at a 30 year high of 8.7%.
(2) The Talking Fed: Fed Chair Powell will speak a couple of times this week along with vice chairs, governors and district presidents:
11/08: Powell, Clarida, Montgomery, Harker and Evans
11/09: Powell, Bullard and Kashkari
11/12 Williams
(3) Treasury Dump: We kick off another round of dumping our debt into the marketplace and it will be very key to see how the longer term offerings are received:
11/08: 3-year note
11/09: 10-year note
11/10: 3- year bond
Market Wrap-up
Treasury Dump
Today kicked off three days of dumping debt into the marketplace with the shorter term 3-year note. $56B went off at a high yield of 0.750% with a bid-to-cover ratio of 2.33.
On Deck for Tomorrow
Monthly Bond Coupon Rollover, 10 year note auction, PPI, Fed Chair Powell