What Happened Last Week?
Ultimately an Uneventful Week Despite Micro-Volatility
Friday morning featured an overnight rally driven by weakness in European PMI data and a logical sell-off following much stronger PMI data in the U.S. Specifically, S&P Global’s Services PMI rose to the highest level in more than 2 years. This is some of the earliest available data for the month of June and the burden of refutation is on incoming data that is weeks away (for instance, this week’s headline report, PCE, is still for the month of May). Friday’s selling never got out of hand, however, and that meant the week as a whole was wholly uneventful in the bigger picture.
Source: Matthew Graham, Mortgage News Daily 6/21/2024)
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) The State of the Consumer.
(1) Inflation Nation: The Fed’s preferred key measure of inflation, Core PCE will be on Friday. Both the Headline and Core readings are expected to move lower on a YOY basis which could give the Fed more cover for one rate cut this year. The market speculation will hinge on if the readings are low enough for the Fed to make a move in September. If the readings are higher than expectations, then expectations for a Fed move will be pushed back.
(2) The Talking Fed: Many Feds will speak this week. The markets will also be keen on learning the results of the latest round of Bank Stress Tests:
- 06/24: Waller, Daly
- 06/25: Bowman, Cook
- 06/26: Bank Stress Tests
- 06/28: Barkin, Bowman
(3) The State of the Consumer: Both Consumer Confidence and Consumer Sentiment are this week. Tuesday’s Consumer Confidence and Inflation Expectations will get more weight.
Treasury Dump
Here is this week’s Treasury auction schedule:
- 06/25: 2-year note
- 06/26: 5_year note
- 06/27: 7-year note
Market Wrap-up
Rosie the Riveter: The region Fed Dallas Manufacturing Index remained in contractionary territory in June with a -15.1 reading.
The Talking Fed: S.F. Fed President Daly didn’t give the markets any direction by just “walking in the middle of road”. She said “We must continue the work of fully restoring price stability without a painful disruption to the economy.”
On Deck for Tomorrow: Case Shiller Home Price Index, FHFA House Price Index, Chicago Fed National Activity Index, Consumer Confidence, Richmond Fed Manufacturing Index, 2 year Treasury Note Auction.