Weekly Mortgage Overview: 2/28/2022

By February 28, 2022Mortgage Overview

What Happened Last Week?

Bonds End Roughly Unchanged As Market Prices Out Some Risk

Bonds started weaker and gradually worked their way back toward unchanged levels as Friday progressed. Mortgaged backed securities (MBS) outperformed for a change, but largely because Treasuries finally had to take a break from outperforming. Painting in broad strokes, markets are moving in a “risk-on” direction due to the absence of a major escalation in Ukraine. This could change, obviously, but until it does, it makes sense for markets to do what they did Friday. In fact, most of that movement took place on Thursday. Friday ended up being “sideways confirmation.”
Source: Matthew Graham, Mortgage News Daily 2/25/22)

What’s on the Agenda for this Week?

Three Things

The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) The Putin Put, (2) Central Bank Palooza and (3) Jobs, Jobs, Jobs.

(1) The Putin Put: The geopolitical uncertainty created by the military conflict in Ukraine and the partial removal of Russia from SWIFT along with other sanctions are driving international funds into U.S. bonds.

(2) Central Bank Palooza: Russia’s Central Bank raised their interest rate from 9.5% to 20.0% and Ukraine’s Central Bank announced the issuance of War Bonds. There will be key interest rate decisions from Canada and Australia this week. From our own Federal Reserve, Fed Chair Powell will speak twice (Wednesday and Thursday) as he gives his semiannual testimony to Congress. The Fed’s Beige Book will also be issued, which is prepared in advance of the next Fed meeting.

(3) Jobs, Jobs, Jobs: There is a ton of job and wage related data this week that culminates in Big Jobs Friday which includes Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings and more.

Market Wrap-up

Manufacturing

The Midwest’s bellwether manufacturing index, the Chicago PMI, showed expansion in February with a 56.3 reading, but that pace was much slower than January’s pace of 65.2 and below market expectations of 63.0.

On Deck for Tomorrow

Australia interest rate decision, Construction Spending, ISM Manufacturing.