What Happened Last Week?
Does E-Commerce Surge Help Explain Friday’s Sell-Off?
Friday began with a puzzler: bonds sold off abruptly in response to economic data that would normally cause bonds to rally. With that, the game was afoot. Market analysts began guessing at reasons and looking under rocks that are seldom disturbed. The first such rock was the “core” retail sales number which came in right on target. But the even more obscure rock of “non-store sales” provided an even clearer notion of a consumer who wasn’t too scared by the banking drama in March. Either way, the market interpreted the data as nowhere near weak enough to force the issue of a Fed pivot.
Source: Matthew Graham, Mortgage News Daily 4/14/2023)
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) The Talking Fed, (2) Across the Pond and (3) Debt and Banking.
(1) The Talking Fed: Last Friday, Waller’s comments certainly pushed MBS lower (worse pricing = higher rates). This week will be the Fed’s Beige Book which is prepared in advance of their next Fed meeting. Next week begins their media blackout so a lot of weight will be put on this week’s speeches.
(2) Across the Pond: There will be key economic releases from China. including their GDP, Retail Sales and Production. There will also be inflationary readings (PPI/CPI) out of Great Britain, Canada and Europe.
(3) Debt and Banking: Our nation’s debt ceiling is once again front and center as we will get the tax receipts this week and know just how underwater we are as debt ceiling negotiations drag on. For the banking system, there will be many bank earnings reports and originations’ reports. Banks are requesting less borrowing from the Fed in a sign that things may have stabilized.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The April Empire State Manufacturing Index surprised to the upside with a very respectable reading of 10.8 vs. estimates of -18.0 following March’s massive loss of -24.6.
Taking it to the House: The April NAHB Housing Market Index remained below 50 which is negative but it increased from 44 to 45 and marks the fourth straight month of incremental improvements.
On Deck for Tomorrow
Housing Starts and Building Permits, China: GDP, Retail Sales and Production.