Weekly Mortgage Overview: 2/5/2024

By February 5, 2024Mortgage Overview

What Happened Last Week?

Was the Jobs Report Real and What Are the Lasting Implications?

Is Friday’s NFP number of 353k versus a 180k forecast “real?” Or is it some distortion created by the annual benchmark revision process? Yes and no. Smart, credible market participants don’t even entertain the notion of intentional manipulation. That said, they’re well aware of unavoidable distortions, and Friday’s payroll count qualifies. That’s not to say the job gains weren’t “real,” but NFP overstated the resilience of the labor market. That’s why yields were still much lower than they were the prior week. Why were they so much higher than Thursday, then? Partly because Thursday capped an aggressive snowball rally that was built on a shaky foundation. The only truly solid foundation will be a sustained return to 2% inflation, and the only thing that would predispose traders to believe in that return any faster would be an obvious deterioration in the data. At the very least, Friday’s jobs report was anything but a deterioration.
Source: Matthew Graham, Mortgage News Daily 2/2/2024)

What’s on the Agenda for this Week?

Three Things

The three areas that have the greatest ability to impact MBS backend pricing. (1) the Talking Fed, (2) Treasury Dump and (3) Domestic Flavor.

(1) The Talking Fed: The bond market continues to react to Powell’s comments on Wednesday which were reinforced by his 60 Minutes interview which was taped before the big jobs data beat. This week a lot of bobble heads will be speaking and the bond market will react in tandem with their forward guidance.

  • 02/05: Goolsbee, Kashkari, Bostic
  • 02/06: Mester, Collins and Harker
  • 02/07: Kugler, Collins, Barkin, Bowman
  • 02/08: Barkin

(2) Treasury Dump: A lot debt will be dumped into the marketplace this week. Thursday’s 30Y auction can have a strong impact on pricing.

  • 02/06: 3-year note
  • 02/07: 10-year note
  • 02/08: 30-year bond

(3) Domestic Flavor: This week’s releases that will get the most attention from bond traders: ISM Non Manufacturing, Consumer Credit.