What Happened Last Week?
9 Day Weekend for the Bond Market
While it’s not technically a 9-day weekend for the bond market, it might as well be. It’s not that this week is inconsequential in terms of economic data and events, just that the data isn’t on a high enough tier to change the big picture. Perhaps if rates were closer to boundary of their recent range we could entertain this week’s reports helping to spark a lead-off toward higher or lower rates, but from our current perch, the most likely outcome would simply be a revisiting of a recent range boundary. The fact that Thursday is an early close before a full closure on Friday only adds to the case for traders tuning out until April 1st. As for Friday specifically, it was a winner in terms of bond market gains, but not for any overt or interesting reason.
Source: Matthew Graham, Mortgage News Daily 3/22/2024)
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) The Talking Fed, and (3) Rosie the Riveter.
(1) Inflation Nation: There will be the Fed’s official key measure of inflation, Core PCE, on Friday. It is expected to rise another 0.3% on top of the previous month’s increase of 0.4%. YOY, it is expected to remain at 2.8%. Bottom line is that this report is NOT expected to show inflation coming down.
(2) The Talking Fed: The bond market will be very sensitive to the post FOMC round of speakers this week.
- 03/25: Bostic, Goolsbee and Cook
- 03/27: Waller
- 03/29: Daly and Powell
(3) Rosie the Riveter: The manufacturing sector has been contracting for at least 15 months depending on which metric you use. This week will be Chicago PMI and Durable Goods Orders.
Treasury Dump
Here is this week’s Treasury Auction schedule:
- 03/25: 3-year note
- 03/26: 5-year note
- 03/27: 7-year note
Market Wrap-up
Domestic Flavor
Taking it to the House: February New Home Sales were a smidge off the mark, hitting 662K vs estimates of 675K but right in line with January’s pace of 664K.
Rosie the Riveter: The March Dallas Fed Manufacturing Survey was dismal with a contractionary reading of -14.4 which is even worse than Feb’s level of -11.3.
On Deck for Tomorrow: Durable Goods Orders, FHFA House Price Index, Case Shiller Home Price Index, Consumer Confidence, Richmond Fed Manufacturing, 5 year Treasury note auction.
Treasury Dump
Three days of dumping debt into the market place kicked off with today’s shorter term 2-year note auction. $66B went off at a high yield of 4.595% and a bid-to-cover ratio of 2.62.