What Happened Last Week?
Another Stock Swoon Keeping Bonds in Check
The entire week was dominated by a close correlation between stock prices and bonds yields. This was especially noticeable after 9:30am ET on any given day (the NYSE opening bell, when more liquidity and volume hit the market), but even outside those hours, there’s been enough correlation that it makes sense to keep an eye on stocks at the moment. It also serves as a reminder that last week’s bond rally may be more fragile than it seems, depending on what the stock market does next.
Continue reading: Matthew Graham, Mortgage News Daily 5/20/22)
What’s on the Agenda for this Week?
Overview
It was a holiday-shortened week with an early close to the bond market on Friday.
Three Things
The three areas that have the greatest ability to impact mortgage backed securities (MBS) pricing this week are: (1) Inflation Nation, (2) Davos, Baby and (3) The Talking Fed.
(1) Inflation Nation: The Feds issue their key measure of inflation (Core PCE) on Friday. Both PPI and CPI were extremely high last time around but were just off of their YOY pace causing investors to trade on the “inflationary peak” theory. The higher this data set is on Friday, the worse it will be for MBS pricing; the lower it is, the better it will be for MBS pricing.
(2) Davos, Baby: This week is the World Economic Forum in Davos, Switzerland. The bond market will be sensitive to comments/speeches/white papers on inflation, economics, etc.
(3) The Talking Fed: Taking center stage on Wednesday will be the release of the Minutes from the last FOMC meeting where they announced a 50BPS rate hike as well as a June 1 start to their “QT” program.
Treasury Dump
There is a series of shorter term note auctions this week.
- 05/24: 2-year note
- 05/25: 5-year note
- 05/26: 7-year note
Market Wrap-up
Domestic Flavor
There were no domestic events today.
On Deck for Tomorrow
Fed Chair Powell, New Home Sales, Richmond Fed Manufacturing, 2-year Treasury note auction.