What Happened Last Week?
Inconsequentially Weaker After Data
Friday was technically a half day for the bond market much like other things technically betray their true nature. It’s a courtesy day for market functioning. That left Wednesday as the last day of the week. Bonds sold off modestly after the morning econ data, but due to the “end-of-week” trading going on, some of that could also be due to position-squaring among longs (i.e., traders who had been betting on lower rates booking profits and getting neutral until the market comes back to life no earlier than next week).
Source: Matthew Graham, Mortgage News Daily 11/22/2023)
What’s on the Agenda for this Week?
Three Things
The three areas that have the greatest ability to impact your backend pricing this week are: (1) Inflation Nation, (2) The Talking Fed and (3) Rosie the Riveter.
(1) Inflation Nation: The Fed’s key measure of inflation, PCE and Core PCE will be issued on Thursday. YOY, this is expected to move lower. The stronger this reading is MOM, the worse it will be for pricing. The weaker it is, the better it will be for pricing.
(2) The Talking Fed: The Fed’s Beige Book will be issued on Wednesday and Fed Chair Powell will speak prior to next week’s media blackout from the Fed leading up to their December FOMC meeting.
(3) Rosie the Riveter: There is a lot of manufacturing news this week with the Richmond Fed Manufacturing Index, Chicago PMI and the ISM Manufacturing PMI.
Treasury Dump
Here is this week’s Treasury note auction schedule:
- 11/27: 2-year and 5-year notes
- 11/28: 7-year note
Market Wrap-up
Domestic Flavor
Taking it to the House: October New Home Sales were 679K on an annualized basis which was much lower than expectations of 725K.
On Deck For Tomorrow: Case Shiller Home Price Index, FHFA Housing Price Index, Richmond Fed Manufacturing, Consumer Confidence and a 7-year Treasury note auction.
Treasury Dump
There were two auctions today. The 2-year note saw $54B go off at a high yield of 4.887% and a bid-to-cover ratio of 2.54 and was considered subpar. The 5-year note saw $55B go off at a high yield of 4.420% and a bid-to-cover ratio of 2.46 and was considered solid.