What Happened Last Week?
Abnormally Uneventful Friday for Bonds
Whether we’re talking about actual Fridays or Thursdays that fall before 3-day weekends, the last trading day of each of the past 4 weeks has not been great for the bond market. One of them marked an abrupt reversal of the best shot at consolidation, and the other three took rates rapidly up to new long-term highs. Friday was great by comparison with Treasury yields falling modestly and mortgage backed securities (MBS) holding mostly steady with minimal losses.
Source: Matthew Graham, Mortgage News Daily 4/22/22)
What’s on the Agenda for this Week?
Overview
Experts see an upside in pricing today on the drop in oil amid concerns over China and a vacuum of data today. But is today a true trend reversal or just a positive day? This is a packed week for economic data; how could that impact pricing?
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Inflation Nation, (2) Domestic Flavor and (3) Geopolitical.
(1) Inflation Nation: On Friday the Fed will issue Core PCE, their official key measure of inflation. The headline PCE reading is expected to hit a new record high while the Core PCE is expected to remain close to the last reading which was a 40-year high.
(2) Domestic Flavor: There is a ton of manufacturing news with Durable Goods Orders, Richmond Fed and Chicago PMI which will all be very important to watch. Thursday’s GDP is the first release for the 1st quarter and is expected to show growth at 1%… the actual data (if significantly higher or lower than the estimate) can have a big impact on pricing.
(3) Geopolitical: Oil prices are back down below $100 on concerns over China’s prolonged shutdown and even an expansion to that shutdown with cases in Beijing surging. NATO and Russia/Ukraine will continue to be of importance to markets.
Market Wrap-up
On Deck for Tomorrow
Durable Goods Orders, New Home Sales, Case Shiller HPI, FHFA Home Price Index, 2 year note auction, Richmond Fed Manufacturing and Consumer Confidence.