What Happened Last Week?
Good Week for Bonds. Next One Could be Interesting.
The bond market traded about as well as anyone could have expected on a week where core monthly CPI came out at 0.3 vs 0.3. If anything, the level of bullishness and resilience was a bit higher than the average market participant probably expected relative to the available data. Part of the reason is speculation that there is about to be some sort of confirmation that the Fed is willing to remain friendly despite the big drop in rates at the end of 2023. There’s specific speculation that today’s appearance by Waller will contain clues about the Fed’s road map. Experts can’t know if it will or won’t… only that it would make for an interesting start to the holiday-shortened week.
Source: Matthew Graham, Mortgage News Daily 1/12/2024)
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) The Consumer, (2) Davos Baby and (3) The Talking Fed.
(1) The Consumer: After last week’s blockbuster jump in Consumer Credit, will we see the same in Retail Sales? There will also be the first look at January’s Consumer Sentiment Index.
(2) Davos Baby: The World Economic Forum (WEF) is in full swing in Davos. The bond market will be focusing on the barrage of different forecasts for 2024 and their expectations for growth/rates.
(3) The Talking Fed: The Fed’s Beige Book will be issued on Wednesday which is prepared in advance of the next FOMC meeting. Speakers this week will be Waller, Barr, Bowman, Williams, Bostic and Daly.
Treasury Dump
There is a 20-year Treasury bond auction on Wednesday.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The January Empire State Manufacturing Index tanked by – 43.7 vs estimates for only -4.7.
On Deck for Tomorrow: Weekly Mortgage Applications, Retail Sales, Import and Export Prices, Industrial Production and Capacity Utilization, Fed’s Beige Book and a 20Y Treasury Bond Auction.