What Happened Last Week?
Still Waiting for a Breakout After Friday’s Uneventful Strength
Heading into last week’s CPI and Fed Day combo, experts expected bonds to be broadly sideways with elevated volatility. But rather than give new direction, the week’s big ticket events only perpetuated the sideways-ness and increased the volatility. Even the non-big-ticket events had a say. Thursday’s Jobless Claims was as big a market mover as anything. On Friday, a few Fed speakers and the Consumer Sentiment data added ups and downs for yields (mostly ups).
Source: Matthew Graham, Mortgage News Daily 6/23/2023)
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) Inflation Nation, (2) Rosie the Riveter and (3) State of the Consumer.
(1) Inflation Nation: This week is the Fed’s key measure of inflation, Core PCE,durab on Friday. Core PCE is expected to increase by another 0.4% on a MOM basis and remain at 4.7% on a YOY basis. However for the headline PCE, it is expected to move from 4.4% down to 3.8% on a YOY basis.
(2) Rosie the Riveter: Will the 10-month string of very weak to dismal manufacturing data find a bottom? We will find out with the release of Durable Goods Orders, Chicago PMI and the Richmond Fed.
(3) The Consumer: Consumer Confidence will be on posted Tuesday and the final UofM Consumer Sentiment on Friday. Also on Friday will be Personal Income and Spending.
Treasury Dump
Shorter term Treasury note auctions are this week.
- 06/26: 2-year note
- 06/27: 5-year note
- 06/28: 7-year note
Market Wrap-up
Rosie the Riveter
The June Dallas Fed Manufacturing Survey continued to slump with a contractionary reading of -26.5 which follows May’s very weak -29.1.
Treasury Dump
Today kicked off three days of dumping debt into the marketplace with the shorter term 2-year note auction. $42B went off at a high yield of 4.670%. Demand was strong with a bid-to-cover ratio of 2.86.
On Deck for Tomorrow
Durable Goods Orders, Richmond Fed Manufacturing Index, Case Shiller, FHFA Housing Price Index, New Home Sales, Consumer Confidence, 5 year note auction.