What Happened Last Week?
Bonds Almost Hold Onto Gains Ahead of Shutdown Uncertainty
Bonds improved moderately overnight Thursday, adding onto what was already a fairly substantial recovery. Friday morning’s PCE data was slightly lower than expected, but bonds didn’t seem unequivocally happy about that. There was a modest extension of the rally and then a slow give-back into the PM hours. Trading was very flat near unchanged levels after noon ET. Month/Quarter-end tradeflows are assumed to be underpinning some of the volatility, as was the uncertainty surrounding the government shutdown.
Source: Matthew Graham, Mortgage News Daily 9/29/2023)
What’s on the Agenda for this Week?
Overview
What is the likelihood of a real trend change from what has been seen over the past couple of weeks?
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Jobs, Jobs, Jobs, (2) Rosie the Riveter and (3) The Talking Fed.
(1) Jobs, Jobs, Jobs: This is a big week for wage and jobs related data that culminates in Big Jobs Friday. This week the focus will be on JOLTS, ADP, Challenger Job Cuts, Initial Weekly Jobless Claims, Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings, Underemployment Rate, Labor force Participation Rate and Weekly Hours.
(2) Rosie the Riveter: After last week’s very weak Chicago PMI, the bond market will be looking to ISM Manufacturing, Factory Orders and ISM Services for the direction of our economy.
(3) The Talking Fed: Here is this week’s schedule of speeches.
- 10/02: Powell, Harker, Williams and Mester
- 10/03: Bowman
- 10/06: Waller
Market Wrap-Up
Domestic Flavor
Bob the Builder: August Construction Spending increased by 0.5% on a MOM basis plus July was revised upward to 0.9%. On a YOY basis, it was up 7.4%. Spending on new single-family construction projects rose 1.7%.
Rosie the Riveter: The national ISM Manufacturing PMI was much better than expected in August, hitting 49.0 versus estimates of 47.7. The Employment Index broke above 50 to 51.2 from July’s level of 48.5.
The Talking Fed
Fed Chair Powell said that “We are still coming through the other side of the pandemic,” He did not comment on current monetary policy or the economic outlook.
On Deck for Tomorrow
JOLTS, Reserve Bank of Australia Interest Rate Decision.