What Happened Last Week?
Uneventful End to an Eventful Year
2023 may be a year that we won’t soon forget, but the past two weeks have been quite the opposite. Friday’s holiday-shortened trading session did nothing to change the narrative. Yields were modestly higher overnight, giving chase to a slightly bigger sell-off in Europe. Domestic traders pushed back toward unchanged levels by midday but sellers resurfaced at the 1pm CME close. Trading levels remained easily within the exceptionally flat range seen since Dec 14th. Experts continue to focus on this week’s economic data and Fed Minutes as the first major sources of potential volatility in 3 weeks.
Source: Matthew Graham, Mortgage News Daily 12/29/2023)
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) Jobs, Jobs, Jobs, (2) The Talking Fed and (3) ISMs.
(1) Jobs, Jobs, Jobs: There is a huge amount of job and wage related data all week long culminating in Big Jobs Friday. The relative strength of the job market and wage pressures will have a big impact on pricing. This week will be JOLTS, ADP, Challenger Job Cuts, Initial Claims, Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings and more.
(2) The Talking Fed: The Minutes from the last FOMC meeting will be issued on Wednesday.
(3) ISMs: After weaker than expected manufacturing data last week (Chicago PMI/Richmond Fed MF), this week’s ISM Manufacturing report will carry a lot of weight. But so too will the ISM Services report as the services sector is 2/3 of our economic engine.
Market Wrap-up
Domestic Flavor
Bob the Builder: November Construction Spending was lighter than expected, 0.4% versus estimates of 0.6%. But the good news is that October had a sizeable upward revision from 0.6% to 1.2%.
On Deck for Tomorrow: Weekly Mortgage Applications, ISM Manufacturing PMI, JOLTS and the Minutes from the last FOMC meeting.