What Happened Last Week?
What to Make of Week’s Weakest Levels After Solid PCE Data
Things looked good for the bond market early Friday morning. While yields were still quite a bit higher than those seen earlier in the week, there was an immediate, positive response to the on-target PCE data. The gains didn’t last long with sellers running the table mostly between 10am and 11am ET. While some of the move could be due to traders moving to the sidelines ahead of near-term potential political developments, month/quarter-end positioning likely had a much bigger impact. Bonds ended the week at their weakest levels, but this pull-back doesn’t inform this week’s trading in the slightest. That honor goes to the active slate of bigger ticket economic data.
Source: Matthew Graham, Mortgage News Daily 6/28/2024)
What’s on the Agenda for This Week?
Overview
This is a holiday-shortened week but it is action packed.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Jobs, Jobs, Jobs, (2) The Talking Fed and (3) Rosie the Riveter.
(1) Jobs, Jobs, Jobs: There is at least one job or wage related data point every business day this week culminating in Big Jobs Friday.
(2) The Talking Fed: Fed Chair Powell speaks this week and the Minutes from the last FOMC meeting will be issued on Wednesday. Last week, the bond market settled into expectations that a September rate cut may not be in the cards. Here is this week’s Fed schedule:
07/02: Fed Chair Powell speaks in Europe
07/03: The minutes from the last FOMC
(3) Rosie the Riveter: There was a huge surprise to the upside with Chicago PMI last week even though it remained in contractionary territory. In fact, really only the S&P Markit/Flash Manufacturing PMIs have shown any growth in manufacturing. This week is the king of manufacturing reports with ISM Manufacturing which has also been in contractionary territory. This is the one area of our economy that has been stuck in a bona fide recession for all of 2024. Factory Orders and ISM Services are also this week.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The June national ISM Manufacturing PMI was lighter than expected (48.5 versus estimates of 49.1) and remained in contractionary territory. However, there were some bright spots as New Orders jumped from 45.4 to 49.3. Employment dipped below 50 though to 49.3.
Bob the Builder: May Construction Spending pulled back by -0.1% versus estimates of +0.1%.
On Deck for Tomorrow
Fed Chair Powell and JOLTS.