Weekly Mortgage Overview: 1/8/2024

By January 8, 2024Mortgage Overview

What Happened Last Week?

ISM Outshines NFP, But Neither Ended Up Leaving a Mark

It has happened before, but it’s not common: those Fridays where bonds move in one direction in response to the jobs report only to move even more in the opposite direction after the ISM Non-Manufacturing Index. Considering that both moves were ultimately erased Friday, ISM definitely had the upper hand. Chalk that up to the jobs report being not as strong as the headline might suggest and to ISM’s employment component being staggeringly weaker. Bonds escaped with minimal damage–especially MBS as they don’t have to worry about an auction cycle like Treasuries this week.
Source: Matthew Graham, Mortgage News Daily 1/5/2024)

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) Inflation Nation, (2) Treasury Dump, and (3) Bank Earnings.

(1) Inflation Nation: Both CPI and PPI will be this week, with the markets giving more weight to CPI. The hotter this reading is, the worse it will be for pricing (and vice versa).

(2) Treasury Dump: There is a huge dose of debt that will hit the marketplace this week. The overall size of the new debt and the constant drip of increase debt is a major concern for long bond traders. The long bond market will correlate the most with the 30-year Treasury bond auction:

  • 01/09: 3-year note.
  • 01/10: 10-year note.
  • 01/11: 30-year bond.

(3) Bank Earnings: With so much “wonky” labor, manufacturing and economic data, the bond market will look to overall bank earnings to understand the health of businesses and consumers.

Market Wrap-up

Domestic Flavor

Consumer Credit: The November Consumer Credit report was much higher than expected with a MOM change of $23.7B versus estimates in the $9B range. It was the second biggest monthly surge in revolving debt since November.

Inflation Nation: The NY Fed’s Monthly Consumer Survey showed that one year inflation expectations dropped to 3.01% in December which is down from November’s reading of 3.36%.

On Deck for Tomorrow: 3-year note auction, Trade Balance, Small Business Optimism.