Weekly Mortgage Overview: 4/22/2024

By April 22, 2024Mortgage Overview

What Happened Last Week?

Sometimes Sideways is The Best Case Scenario

Granted, there was a possibility that Friday could have been a rally day for the bond market, but as seen in the overnight trading session, that possibility depended on the escalation of war in the Middle East. There aren’t many other reasons for bonds to push back too much on recent weakness. One of the only other reasons would be Friday position squaring and short covering, but that would be just as much of an indication of ongoing bearishness in bonds. In that sense, holding sideways is possibly the best victory that could have been hoped for. The fact that Tuesday’s high yields had been avoided through the end of the week could even signal sideways vibes until May, at which point data and the Fed will indicate the direction of the next big move.
Source: Matthew Graham, Mortgage News Daily 4/19/2024)

What’s on the Agenda for This Week?

Overview

The number one question: What will it take for rates to move lower?

Three Things

The three areas that have the greatest ability to impact MBS backend pricing this week. (1) Inflation Nation, (2) GDP and (3) Central Bank Palooza.

(1) Inflation Nation: After several rounds of higher PCE, CPI and PPI data, there is one last major report prior to next week’s FOMC meeting. And that report is none other than the Fed’s preferred measure of inflation, PCE and Core PCE. The PCE MOM data is expected to increase over last month’s data. The key for bond markets will be if the increase is higher or lower than expectations and the results could have a big impact on pricing.

(2) GDP: The first look at the 1st quarter GDP is on Thursday. It is expected to come in the 2.5% range which is very important as long bonds react very negatively to GDP levels in the 2.5% to 3.00% range.

(3) Central Bank Palooza: There will be key interest rate decisions out of the world’s #2 and #3 economies with the People’s Bank of China and the Bank of Japan.

Treasury Dump

This will be a record setting week of dumping debt into the marketplace. It will need to be seen what the appetite is for the large supply that will hit.

  • 04/23 2 year note
  • 04/24 5 year note
  • 04/25 7 year note

Market Wrap-up

Domestic Flavor

Glass Half Full: The Federal Reserve’s Chicago District put out their March National Economic Activity Index and it rose from 0.05 in February to 0.15 in March, which beat out expectations of 0.09.

Central Bank Palooza

The People’s Bank of China kept their interest rate at 3.45%.

On Deck For Tomorrow

New Home Sales, Richmond Fed Manufacturing, 2-year Note auction.