Weekly Mortgage Overview: 10/24/2022

By October 24, 2022Mortgage Overview

What Happened Last Week?

Crazy, Scary Morning Gives Way to Moderate Gains

The bond market gamed the Fed Friday, and won (i.e., the long end sold until the short end priced in lower rate hike odds). OK, perhaps it’s not quite that simple, but it’s not too much more complicated. The only potentially complicating factor would be the unknown extent of Japan’s participation. We know the Bank of Japan (BOJ) bought Yen aggressively enough that it could not have been done without selling USD-denominated assets, such as the massive stockpile of Treasuries it owns, but there’s uncertainty as to how much of that could have been drawn from the Fed’s RRP facility.
Source: Matthew Graham, Mortgage News Daily 10/21/22)

What’s on the Agenda for this Week?

Three Things

The three areas that can have the biggest impact on your backend pricing this week are: (1) Central Bank Palooza, (2) Inflation Nation and (3) Eye on the Consumer.

(1) Central Bank Palooza: There are three major Central Bank meetings and policy statements this week: interest rate hikes out of the Bank of Canada and the European Central Bank. The Bank of Japan is expected to stand pat on their negative rate as they continue to pump their currency into the market. The ECB will get the majority of the focus from the marketplace.

(2) Inflation Nation: Tthe Fed’s key measure of inflation, Core (ex food and energy) PCE will be issued on Friday. This is expected to rise from 4.9% to 5.2% on a YOY basis.

(3) Eye on the Consumer: There will be two key readings on the consumer this week; the market will focus on their inflation expectations. Tuesday’s Consumer Confidence is expected to dip from last month’s surprise higher-than-expected reading and on Friday will be the final UofM Consumer Sentiment Index.

Treasury Dump

Three days of dumping the debt into the market begin on Tuesday:

  • 10/25: 2-year note
  • 10/26: 5-year note
  • 10/27: 7-year note

Market Wrap-up

Domestic Flavor

Markit Down: The Preliminary October Markit Manufacturing PMI hit contractionary territory with a 45.8 vs 48.0 reading. Services also disappointed with reading of 47.5 vs estimates of 49.0.

On Deck for Tomorrow: FHFA Home Price Index, Case Shiller Home Price Index, Consumer Confidence, Richmond Fed Manufacturing, 2-year Treasury Auction.