What Happened Last Week?
Once More: What’s Up with MBS Underperformance?
The notion of mortgage backed securities (MBS) underperforming Treasuries was front and center Friday–not because that underperformance was especially large, but mainly because MBS were often in the red while Treasuries were in the green. There is nothing new to add to Thursday’s similar discussion of MBS underperformance. As for nuts and bolts, it was a boring day for bonds with modest gains for the long end of the yield curve (one major reason for MBS underperformance) and an uneventful, sideways grind in the afternoon.
Source: Matthew Graham, Mortgage News Daily 6/14/2024)
What’s on the Agenda for This Week?
Overview
This is a holiday-shortened week with the bond market CLOSED on Wednesday.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Retail Sales, (2) the Talking Fed and (3) Central Bank Palooza.
(1) Retail Sales: This is the biggest economic release of the week and will give a better understanding of our consumer-driven economy. The last time around the headline number was flat at 0.0 and is expected to move to 0.3% this time around. Consumer Credit Changes have not reflected any pick-up in consumer spending though. The higher this data series is, the worse it will be for MBS pricing. And vice versa.
(2) The Talking Fed: Now that the FOMC meeting and Economic Projections are in the rearview mirror, the media blackout period for Fed speak is over and many this week will give their take on the Dot Plot chart, etc.
- 06/17: Harker, Kashkari, Williams
- 06/18: Barkin, Logan, Musalem, Goolsbee, Cook
- 06/20: Atlanta Fed Business Inflation Expectations, Barkin
(3) Central Bank Palooza: Interest rate decisions will be issued by Australia and England. The Bank of England will take center stage. They were widely expected to be the first G7 Central Bank to start cutting but that distinction went to the Bank of Canada. The BofE keeps pushing back their first rate cut and may push out even further at this meeting.
Treasury Dump
There is an important 20-year Treasury Bond auction on Tuesday.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The June NY Empire Manufacturing Index contracted with a -6 reading which was better (less worse) than expectations of -9.
On Deck For Tomorrow: Retail Sales, 20-year Treasury Bond auction, Industrial Production and Capacity Utilization.