Weekly Mortgage Overview: 9/5/2023

By September 5, 2023Mortgage Overview

What Happened Last Week?

What’s Up with Friday’s Sell-Off?

Bonds lost ground Friday and it definitely wasn’t as simple as traders having second thoughts about the strength of the day’s jobs report. While it’s true that the 3.8% unemployment rate overstated last month’s shift (due to the rise in the participation rate), it’s also true that this is the first time since 2020 that NFP has been under 200k for 2 consecutive months (revisions are unlikely to change that, given the prevailing trend). The lopsided nature of the selling pointed to yield curve considerations and the odd combination of positioning for an NFP Friday, a Friday before a 3-day weekend, and the first day of a new month all at the same time. It wasn’t officially an early closer, but the bond market got in and got out by lunch, leaving 10-year yields 7.5bps higher. MBS only lost an eighth and change due to curve steepening (shorter-term yields fared better and MBS aren’t expected to be as long-lived as 10-year Treasuries).
Source: Matthew Graham, Mortgage News Daily 9/1/2023)

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) Central Bank Palooza, (3) Services.

(1) The Talking Fed: This is the last full week of commentary/speeches before their media black-out period leading up to the next FOMC meeting. This week will be the Fed’s Beige Book and speeches from Susan Collins, John Williams and Raphael Bostic.

(2) Central Bank Palooza: The Bank of Canada will issue a key interest rate decision and policy statement on Wednesday.

(3) Services: The biggest economic report of the week will be Wednesday’s ISM Non Manufacturing PMI which is about 2/3 of our economic engine.

Market Wrap-up

Domestic Flavor

Rosie the Riveter: The July Factory Orders contracted by -2.1 versus estimates of -0.1.

Central Bank Palooza

:The Reserve Bank of Australia kept their key interest rate at 4.1%.

On Deck for Tomorrow

:Trade Balance, ISM Services, Fed’s Beige Book and the Bank of Canada interest rate decision.