What Happened Last Week?
Decent Recovery but MBS Underperform
On Thursday, 10-year yields came close to spiking 20bps, trough to peak, in the wake of hotter CPI data and a lousy 30-year bond auction. That’s a brisk day of selling and one that didn’t line up with the week’s theme (adjusting to softer Fed comments and pricing in some safe-haven flows surrounding the Israel/Gaza War). Friday’s rally started early and stayed strong all night. A pop in consumer inflation expectations brought the rally to an end, but bonds held on to gains without any drama in the PM hours. MBS underperformed along with the short end of the yield curve.
Source: Matthew Graham, Mortgage News Daily 10/13/2023)
What’s on the Agenda for this Week?
Three Things
:The three areas that can have the greatest impact on MBS backend pricing this week are: (1) Geopolitical, (2) The Talking Fed and (3) Domestic Flavor.
(1) Geopolitical: The developing story out of Israel and the military escalation on multiple fronts will continue to dominate both the news and the bond markets. The UAW strike(s) are also a concern for markets.
(2) The Talking Fed: There is a ton of Fed speak this week as we near next week’s media blackout from the Fed ahead of the November FOMC meeting.
- 10/16: Harker
- 10/17: Williams, Bowman, Barkin
- 10/18: Waller, Williams, Bowman, Harker, Cook and the Fed’s Beige Book
- 10/19: Jefferson, Powell, Goolsbee, Barr, Bostic, Logan and Harker
- 10/20: Harker and Mester
(3) Domestic Flavor: The biggest domestic economic report of the week is Tuesday’s Retail Sales data.
Treasury Dump
There is an important 20-year Treasury Bond auction on Wednesday.
Market Wrap-up
Rosie the Riveter: The October NY Empire Manufacturing Index contracted with a reading of -4.6 but that was better (less worse) than expectations of -7.0.
On Deck for Tomorrow: Retail Sales, Industrial Production and Capacity Utilization, NAHB Housing Marketing Index.