Weekly Mortgage Overview: 1/17/2023

By January 17, 2023Mortgage Overview

What Happened Last Week?

Incidental Weakness Today, but Let’s Focus on the Bigger Picture

Bonds tried to stage a mid-day rally on Friday, but ended up sliding into moderately weaker territory in the afternoon. There were no clear catalysts in terms of economic data or news headlines, but the usual suspect before a 3-day weekend is tendency for traders to close positions that are more exposed to risk. Bets on rates breaking into a lower portion of the range would indeed be somewhat risky given that they weren’t able to accomplish that in Thursday’s post-CPI rally. In the bigger picture, that dividing line (roughly 3.40% in terms of 10-year yields) could serve as a useful line in the sand that lets us know when the bond market is more willing to shift gears and commit to the longer-term downtrend in rates–the one that hopefully began in early November.
Source: Matthew Graham, Mortgage News Daily 1/13/23)

What’s on the Agenda for this Week?

Three Things

The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Inflation Nation, (2) Davos Baby and (3) Central Bank Palooza.

(1) Inflation Nation: After last week’s decline in the headline CPI data, will there be something similar in this week’s PPI data?

(2) Davos Baby: The bond market will be very sensitive to the barrage of speeches, round tables and white papers in the non-stop drip of headlines out of the World Economic Forum in Davos.

(3) Central Bank Palooza: There will be key Interest Rate Decisions and Policy Statements out of the Bank of Japan and the People’s Bank of China.

Market Wrap-up

Domestic Flavor

Rosie the Riveter: The January NY Empire Manufacturing Index absolutely cratered, falling to an unheard of -32.9 vs. estimates of -4.5.

On Deck for Tomorrow

Bank of Japan Interest Rate Decision, Retail Sales, Producer Price Index, Industrial Production and Capacity Utilization, NAHB Index, 20Y Bond Auction, Fed Beige Book.