What Happened Last Week?
Fairly Inconsequential Friday Ahead of a Very Consequential Week Ahead
Despite feeling like a bumpy ride at times, the bond market actually didn’t do anything too interesting Friday–at least in the context of the bigger picture. During times of less volatility, it would indeed be interesting to note that mortgage backed securities (MBS) gave up roughly half a point between 9am and 4pm, but in Friday’s case, it was just an extension of Thursday’s trend and very safely inside the week’s trading range. For more consequential goings-on, experts’ attention was already turned toward this week’s CPI data as a key point of consideration for the next Fed meeting (and thus, the potential market panic that could take hold if the data is particularly far from forecasts).
Source: Matthew Graham, Mortgage News Daily 9/9/22)
What’s on the Agenda for this Week?
Overview
Will mortgage rates be higher or lower than they are now by the end of September?
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Inflation Nation, (2) Consumer Sentiment and (3) Treasury Dump.
(1) Inflation Nation: Two key measures of inflation will be issued this week (CPI and PPI) with the focus on the MOM Core CPI on Tuesday which is expected to increase another 0.3%. The higher these two data sets are, the worse it will be for MBS pricing and of course, vice-versa.
(2) Consumer Sentiment: The first look at the September reading is this week (it’s released twice a month). It is expected to pick up a little from August but still in very low territory.
(3) Treasury Dump: The 3-year and 10-year Treasury note auctions are today but the most important auction of the week is Tuesday’s 30-year Bond auction.
Market Wrap-up
Domestic Flavor
There were no major domestic data releases today.
Treasury Dump: There were two auctions today with MBS moving lower (worse backend pricing = higher mortgage rates) after the weak 10-year note auction. $32B went off at a high yield of 3.330% with a bid-to-cover ratio of 2.37, below the recent 6 auction average of 2.42.
On Deck for Tomorrow: CPI, 30-year Treasury Bond Auction, Monthly Bond Coupon Rollover.