What Happened Last Week?
Massive Reversal After Russia/Ukraine Headlines
Quite the round trip Friday as bond yields hit the weakest levels in more than 2 years only to reverse course late in the day to fully erase an entire week’s worth of weakness–at least for Treasuries. The reversal was driven by headlines regarding a potentially imminent Russian invasion of Ukraine. 10-year Treasury yields fell more than 10bps and MBS rallied more than half a point in response.
Source: Matthew Graham, Mortgage News Daily 2/11/22)
What’s on the Agenda for this Week?
Overview
Will rates and pricing rebound this week? Next week? Learn what is really impacting MBS pricing.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are. (1) Global Flavor, (2) The Talking Fed and (3) Inflation Nation.
(1) Global Flavor: There are large swings in long bond yields as the speculation of escalation or de-escalation with Russia/Ukraine changes. This in turn drives foreign investment into our notes and bonds as a safe-haven.
(2) The Talking Fed: The Minutes from their last FOMC meeting will be issued and several voting and nonvoting Fed members will speak this week. The MBS market is the most concerned about QT, the reduction of their balance sheet – timing/scale/scope.
(3) Inflation Nation: There was a monster CPI report last week. This week will be the front-end of that equation which portends the next round of CPI data with this week’s PPI data. There will also be Import/Export Prices.
Market Wrap-up
Global Flavor
There were no economic releases today, Momentum was lower in backend pricing, mainly due to a pullback in the expectations of an invasion into the Ukraine by Russia. That fear was pushed higher on Friday due to the Whitehouse’s statement but has pulled back in today’s trading as the “imminent” invasion did not occur this weekend and more dialog appears to be forthcoming.
On Deck for Tomorrow
NY Empire Manufacturing Index, Producer Price Index.