Weekly Mortgage Overview: 5/31/2022

What Happened Last Week?

No Whammies in Inflation Data. Is The Ceiling In?

Friday began with the much-anticipated PCE inflation data coming in right in line with expectations. The result: a bond market that was already mostly unchanged in the overnight session remained mostly unchanged in early trading. With yields hovering around the best levels in more than a month, it’s hard to object to the flat performance. In fact, even a modest give-back could be tolerated and understood from the standpoint of traders squaring up positions heading into the 3.5-day weekend. Bonds closed at 2pm ET Friday and were fully closed on Monday.
Source: Matthew Graham, Mortgage News Daily 5/27/22)

What’s on the Agenda for this Week?

Three Things

The three areas that have the greatest ability to impact mortgage backed securities (MBS) pricing this week are: (1) The Talking Fed, (2) Jobs, Jobs, Jobs and (3) ISMs.

(1) The Talking Fed: May is coming to an end and the Fed’s Quantitative Tightening (QT) where they begin to repurchase fewer and fewer Treasury notes and Agency MBS begins June 1. The week kicks off with Biden and Powell meeting at the White House. They will issue their Beige Book on Wednesday which is released in advance of their June FOMC meeting.

(2) Jobs, Jobs, Jobs: There is a ton of job or wage related data all week with ADP Private Payrolls, JOLTS, Job Cuts, Weekly and Continuing Jobless Claims and then culminating with Friday’s BLS Jobs report with Non Farm Payrolls, Average Hourly Earnings and the Unemployment Rate.

(3) ISMs: There is a lot of manufacturing related data with Chicago PMI and ISM PMI taking center stage. But there will also be Factory Orders, Non Farm Productivity and Unit Labor Costs. Rounding out the week will be ISM Non Manufacturing PMI.

Central Bank Palooza

The Bank of Canada is expected to raise their interest rate at their meeting on Wednesday.

Market Wrap-up

Domestic Flavor

Taking it to the House: The March FHFA Housing Price Index grew at a month-over-month pace of 1.5% vs. estimates of 1.8%. The April year-over-year change in Home Prices in the Case Shiller Index was at a record pace of 21.2% vs. estimates of 20.0%.

Manufacturing: The bellwether Chicago PMI was much stronger than expected in May, with a robust reading of 60.3 vs. estimates of 55.0.

Consumer Confidence: The Conference Board’s survey dropped from an upwardly revised 108.6 in April to 106.4 in May. However, that is stronger than the consensus estimates calling for only 104.0.

On Deck for Tomorrow

Bank of Canada Interest Rate Decision, JOLTS, ISM Manufacturing, Construction Spending and the Fed’s Beige Book.