What Happened Last Week?
Super Duper Flat After Overnight Losses
In a vacuum limited to last week, Friday ended up being the only interesting day because it was the only outlier in terms of bond market price action. On the previous 4 days, the highest MBS price was within a 0.09 range and the lowest price was within a 0.06 range. Lastly, the widest high/low range of the week was about a quarter point. If you’re not sure what to make of that, it means Monday-Thursday were flat. Friday was flat too, but only after overnight losses took MBS prices almost a half point below Thursday’s highs. In the bigger picture, this still isn’t that significant–especially considering these levels would still be the best in several months before the previous Thursday’s friendly CPI data.
Source: Matthew Graham, Mortgage News Daily 7/19/2024)
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) Central Bank Palooza and (3) GDP Report Card.
(1) Inflation Nation: The Fed’s key measure of inflation, Core PCE will hit on Friday just days before the July FOMC meeting. After trailing lower in the last MOM reading, it is expected to increase this time around. Regardless, a stronger (higher) reading will be negative for pricing while a lower reading will be great for pricing.
(2) Central Bank Palooza: The People’s Bank of China has already lowered their main interest rate by 10BPS this morning which was not expected but does follow a series of weaker than expected GDP data. The Bank of Canada may also lower their rate.
(3) GDP Report Card: The preliminary, first look at the 2nd quarter GDP will be on Thursday, and is expected to come in at 2%.
Treasury Dump
A massive amount of debt is dumping into the marketplace this week.
- 07/23; 2-year note $69B
- 07/24; 5-year note $70B
- 07/25; 7-year note $44B
Market Wrap-up
Central Bank Palooza: The People’s Bank of China has already lowered their main interest rate by 10BPS this morning which was not expected but does follow a series of weaker than expected GDP data.
The Talking Fed: The June Chicago Fed National Activity Index missed to the downside by hitting 0.05 versus estimates for double that level of 0.10.
On Deck for Tomorrow: Existing Home Sales, Richmond Fed Manufacturing Index, 2 year Treasury note auction.