What Happened Last Week?
This is How They Get Ya
Bonds ended up rallying a bit to close out the week, sorta. 10-year yields were 3bps lower day-over-day, making it “all the way down” to the glorious level of 4.25%. And that’s how they get ya! 4.25%, of course, is not a glorious level, nor is it even worth any new optimism. On a summertime Friday afternoon, a small token correction to the highest weekly closing yield since 2007 is just the latest piece of evidence that rates are still high. In short, nothing happened Friday and this week is light on data with the focus already clearly on Friday’s Jackson Hole speech from Fed Chair Powell.
Source: Matthew Graham, Mortgage News Daily 8/18/2023)
What’s on the Agenda for this Week?
Overview
What will it take for MBS pricing to start to trend upward?
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) The Talking Fed, (2) Rosie the Riveter and (3) Treasury Dump.
(1) The Talking Fed: This week will be the Kansas City Federal Reserve’s Economic Symposium in Jackson Hole, WY. There was plenty of coverage which really heats up on Wednesday. The focus will be Friday’s speech by Fed Chair Powell but leading up to that there will be plenty of speeches/interviews by Federal Reserve District presidents and governors. The bond market is going to be extremely sensitive to discussions around economic growth, Fed policy, their forward guidance on interest rates and inflation.
(2) Domestic Flavor: There will be some key manufacturing news this week with Durable Goods Orders and the Richmond Fed Manufacturing survey. The final University of Michigan Consumer Sentiment Index and inflation expectations will get plenty of attention.
(3) Treasury Dump: This big sell-off and trend lower started with the Treasury’s 30-year bond auction on August 10th. There is an important 20-year Treasury bond auction on Wednesday.
Market Wrap-up
Domestic Flavor
There were no domestic events today
Across the Pond
Germany: PPI MOM -1.1% vs. estimates of -0.2%.
On Deck for Tomorrow
Existing Home Sales, Richmond Fed Manufacturing, Fed Speakers: Bowman, Goolsbee.