What Happened Last Week?
What Debt Ceiling? Yields Follow NFP Higher
After being utterly bombarded for weeks, newswire feeds at trading terminals were suddenly devoid of debt ceiling headlines. To be fair, there have been a few mentions of final approval set for this weekend, but markets moved on long ago. If there was any reaction in longer term rates, it played out by Tuesday night. Friday’s sell-off was all about nonfarm payrolls. Bonds continued selling into Friday afternoon with 5.0 MBS losing almost half a point.
Source: Matthew Graham, Mortgage News Daily 6/2/2023)
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) Services, (2) Central Bank Palooza and (3) Texas Tea, Black Gold.
(1) Services: The most important domestic economic release this week is ISM Non-Manufacturing PMI which accounts for 2/3 of our economy. The ISM Manufacturing report was very weak but there has been some stability in the services sector.
(2) Central Bank Palooza: There will be key interest rate decisions and policy statements from the Bank of Canada and the Reserve Bank of Australia. Both are expected to NOT change their key rates.
(3) Texas Tea, Black Gold: The recent announced Saudi output cut of 1 million barrels a day has oil prices rising. Also, the U. S. has yet to start to refill our Strategic Oil Reserves that we liquidated (wasted) to drive gas prices lower very briefly.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: April Factory Orders were lighter than expected, 0.4% vs estimates of 0.5% and more than half of March’s pace of 0.9%.
Services: The May national ISM Non-Manufacturing PMI (2/3 of our economy) stayed in expansionary territory but just barely at 50.03 vs estimates of a much stronger 51.5. New Orders fell and so did the Employment Index (which was yet another 3rd party jobs report that was contrary to the numbers that the BLS is pumping out). Prices Paid fell as well.
On Deck for Tomorrow
Reserve Bank of Australia Interest Rate Decision.