Weekly Mortgage Overview: 2/20/2024

By February 20, 2024Mortgage Overview

What Happened Last Week?

Inflation Surprises Delay the Decision

In the short term, it was nice to see that Friday’s massively higher PPI reading didn’t do more than it did to crush the bond market’s spirit. This isn’t the craziest turn of events given that there was already a bit of spirit crushing after Tuesday’s CPI, but that several Fed speakers said they’re not reading too much into one month of data that breaks from the recent disinflationary trend. In the slightly bigger picture, however, there’s an opportunity cost. Sure, things may not be unimaginably worse than they were the previous week, but where would we be if inflation came in slightly below forecast? Very likely, that would have resulted in a much more constructive narrative heading into March where a decent result in NFP and CPI in 3 weeks would pave the way for the Fed to give the first signal that a rate cut would be on the table in subsequent meetings. As it stands, even if the data released in March is bond-friendly, it will have to be taken with a grain of salt until April. More waiting as opposed to less.
Source: Matthew Graham, Mortgage News Daily 2/16/2024)

What’s on the Agenda for this Week?

Three Things

The three areas that will get the most attention from bond traders this holiday-shortened week are: (1) The Talking Fed, (2) Treasury Dump and (3) Geopolitical.

(1) The Talking Fed: The highlight this week will be the release of the Minutes from the last FOMC meeting but throughout the week there will be important speeches:

  • 02/21: Bostic, Bowman and the FOMC Minutes
  • 02/22: Jefferson, Harker, Kashkari, Cook
  • 02/23: Waller

(2) Treasury Dump: There is an important 20-year Treasury bond auction on Wednesday.

(3) Geopolitical: In the vacuum of any meaningful domestic economic releases, the markets will focus on geopolitical escalations globally as well as discussions in the House over yet another looming government shutdown.

Market Wrap-up

LEI: The January Leading Economic Indicators was weaker than expected (-0.4% versus estimates of -0.3%) and December was revised lower (-0.1% down to -0.2%). This marks the 22nd straight month of negative readings (declines in economic activity) and marks 23 out of the last 25 months. This is the worst streak since the collapse of Lehman and is completely decoupled from the GDP reports.

On Deck for Tomorrow: Weekly Mortgage Applications, Atlanta Fed Business Inflation Expectations, FOMC Minutes and a 20Y Treasury bond auction.