Weekly Mortgage Overview: 6/10/2024

What Happened Last Week?

What Jobs Report? Bring on CPI and the Fed

Bonds made it almost all week putting on a superhuman display of immunity to bad news, but Friday’s jobs report was the kryptonite. Whether or not a trader has any criticism for volatility in the payrolls data, they still agreed on the move with 10-year yields up nearly 15bps by the close. MBS outperformed nicely, as was hoped they would, thus limiting the worst possible rate sheet outcomes. In fact, the week ended in better shape than the last and thoughts have already turned toward this week’s bigger ticket events (CPI on Tuesday and the Fed on Wed). And yes, this is a “dots” meeting for the Fed…
Source: Matthew Graham, Mortgage News Daily 6/7/2024)

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 Talking Fed, (2) Inflation Nation and (3) Central Bank Palooza.

(1) The Talking Fed: The Fed’s latest Interest Rate Decision and Policy Statement will be this Wednesday at 2 pm ET, followed by a live presser with Fed Chair Powell at 2:30 pm. The bond market will focus on their release of their Economic Projections which is used to create the famous “dot plot chart”.

(2) Inflation Nation: Both CPI and PPI are this week with the markets giving the most weight to MOM Core CPI Wednesday morning. Bond yields are very sensitive to changes in inflation.

3) Central Bank Palooza: The Bank of Japan, which had increased their key interest rate two meetings ago, will speak on Friday.

Treasury Dump

Here is this week’s auction schedule with Thursday’s 30Y auction getting the most weight from bond traders:

  • 06/10: 3-year note
  • 06/11: 10-year note
  • 06/13: 3-year bond

Market Wrap-up

Treasury Dump

The week kicked off with the shorter term 3-year note auction at 1:00. $58B went off at a high yield of 4.659% and a bid-to-cover ratio of 2.43.

On Deck for Tomorrow

10-year Treasury note auction, NFIB Small Business Optimism Index, Fed starts two days of meetings.