Weekly Mortgage Overview: 3/14/2022

By March 14, 2022Mortgage Overview

What Happened Last Week?

Uncharacteristically Quiet, But Still Slightly Weaker

Bonds started Friday’s overnight session stronger, but lost ground on Putin propaganda regarding progress in peace talks with Ukraine. Meanwhile, Russian artillery was moving into firing positions around Kyiv, but headline reading trade algorithms didn’t care. Bonds reversed course during the day after Ukraine’s Kuleba said there’d been zero progress in peace talks. All of the above took place inside the week’s narrowest range and in the lightest volume.
Source: Matthew Graham, Mortgage News Daily 3/11/22)

What’s on the Agenda for this Week?

Overview

Aren’t mortgaged backed securities (MBS) supposed to just rebound after a bad week? Not when one of the largest buyers of MBS is gone. Hang on, it’s gonna be a bumpy ride.

Three Things

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

(1) Central Bank Palooza: There will be key interest rate decisions and policy statements from three out of the world’s top five central banks: U.S., Japan and Great Britain. Our own Federal Reserve will get the most weight from bond traders. Now that the Fed has stopped buying MBS (as of Friday), experts will be very keen to learn about their QT (balance sheet reduction) plans. While the market is expecting a series of gradual ¼-point rate hikes at each meeting, there is no guarantee that they won’t do more at this meeting. The big key this week will be their Economic Projections (dot plot).

(2) Geopolitical: Even though Florida has declared Covid over, it is still a major disruptive factor as China has locked down over 17 million, which has shut down major factories and ports and will disrupt exports significantly. Russia/Ukraine will continue to be a big factor in pricing as well.

(3) Inflation Nation: We had the highest inflation level in history for the CPI measure last week. This week will see the front end of that with PPI, which will portend what the next round of CPI data will look like.

Market Wrap-up

Domestic Flavor

There were no major domestic economic releases today. Today marked the first trading session since the Fed stopped purchasing MBS.

On Deck for Tomorrow: FOMC begins two days of meetings, PPI, NY Empire Manufacturing Index.