Weekly Mortgage Overview: 5/15/2023

What Happened Last Week?

Bonds Bounce as Data Confirms Range Resistance

Thursday’s bounce at 3.35% suggested that the bond market’s will to rally may have been running out of steam. It was far from a guarantee considering bonds nonetheless ended the day at lower yields, but a vague, potential warning perhaps. Friday’s early trading suggested the market hadn’t made up its mind before the 10am econ data. After the data, however, the range received clear reinforcement from the higher inflation expectation component in the Consumer Sentiment numbers.
Source: Matthew Graham, Mortgage News Daily 5/12/2023)

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) Domestic Flavor and (3) Debt Ceiling.

(1) The Talking Fed: This week is overloaded with speeches from Federal Reserve governors and presidents with several members having multiple speeches.

  • 05/15: Bostic, Kashkari, Barkin
  • 05/16: Mester, Bostic, Williams, Logan
  • 05/17: Jefferson, Logan
  • 05/18: Williams, Powell

(2) Domestic Flavor: There is a ton of housing market related news this week but it will be Retail Sales that will get the most weight by bond traders.

(3) Debt Ceiling: As we move closer and closer to June, speculation and concern over the looming debt ceiling will continue to be a major focal point for all the markets.

Treasury Dump

A 20-year bond auction will be held on Wednesday.

Market Wrap-up

Domestic Flavor

Rosie the Riveter: After a surprise gain in April, the May Empire State Manufacturing Index dropped to its worst level (excluding the COVID shutdown). It dropped from +10.8 in April down to -31.8 in May.

On Deck for Tomorrow: Retail Sales, Industrial Production and Capacity Utilization, NAHB Housing Market Index.

The Talking Fed

Atlanta Fed President Raphael Bostic said “If there’s going to be a bias to action, for me it would be a bias to increase a little further as opposed to a cut” and that he didn’t see a reason to cut at all in 2023 even if we went into a recession.