Weekly Mortgage Overview: 3/7/2022

What Happened Last Week?

Yields Near Recent Lows Heading into Another Highly Uncertain Weekend

Bonds began the Friday overnight session with a sharp rally due to the attack/fire at the nuclear plant in Ukraine. As more dire scenarios were ruled out, bonds bounced, but never came close to moving into weaker territory. Weaker wage growth in the jobs report paved the way for additional gain the morning hours, but the broader focus remained on Ukraine. The same patterns continued to play out with stocks and bond yields showing extreme correlation (both moving lower today) and oil prices rising. Despite the small pull-back, 10-year yields remained more than 10bps lower by the close and mortgage backed securities (MBS) were up more than a quarter point. Lender rate sheets took a big leap back toward recent lows.
Source: Matthew Graham, Mortgage News Daily 3/4/22)

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) Inflation Nation and (3) Treasury Dump.

(1) The Putin Put: Geopolitical concern remains the primary focus of long bond traders and this week will continue to be dominated by the news and events of Ukraine/Russia. Of note is the prospect of the U.S. banning Russian oil and any possible agreement via negotiations.

(2) Inflation Nation: Consumer Prices are expected to rise from 7.5% to 7.9%. This is the last major inflation report prior to the FOMC decision and follows a strong jobs report last Friday. The higher this number is the more weight bond traders will give to future Fed action.

(3) Treasury Dump: There are two important auctions this week with the 10-year note and 30-year bond. The bond auction will get more weight and direct correlation to MBS backend pricing.

Market Wrap-up

Domestic Flavor

Consumer Credit: January’s data was a huge miss…hitting ONLY $6.84B which was well below market expectations of $23.8B and below December’s pace of $18.9B.

On Deck for Tomorrow: Trade Balance and a 3-year Treasury note auction.