Weekly Mortgage Overview: 7/29/2024

What Happened Last Week?

Straightforward Gains After Important Inflation Data

While Friday’s monthly core PCE headline may have technically been higher than the median forecast, a vast majority of forecasters abstained from submitting updated guesses to data aggregators after Thursday’s quarterly PCE data. Had they been compelled to do so, the forecast would almost certainly have risen to 0.2 from 0.1 and Friday’s unrounded number of 0.182 would be the logical beat that the market traded… logically. In fact, one might call the 2-day action “boring” considering Friday morning’s quick PCE-driven rally almost perfectly offset Thursday’s PCE-driven sell-off and neither was very big in the bigger picture.
Source: Matthew Graham, Mortgage News Daily 7/26/2024)

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) Jobs, Jobs, Jobs and (3) Central Bank Palooza.

(1) The Talking Fed: On Wednesday will be the latest FOMC Interest Rate Decision and Policy Statement. The markets are not expecting a cut at this meeting but do expect them to set the stage for a September rate cut. Fed Chair Powell will give a live presser after the release of the FOMC Statement. This is NOT a meeting where they release their economic projections.

(2) Jobs, Jobs, Jobs: There is a ton of job and wage related data all week culminating in Big Jobs Friday. Overall, the collective strength or weakness in this data will have a huge impact on pricing. This week is JOLTS, Employment Cost Index, ADP Payrolls, Unit Labor Costs, ISMs, Challenger Job Cuts, Initial Weekly Jobless Claims, Continuing Jobless Claims, Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings, Average Hourly Work Week, Labor Force Participation Rate, and U6 Underemployment Rate.

(3) Central Bank Palooza: There will be important interest rate decisions from two of the largest central banks in the world, with the Bank of Japan and the Bank of England. The BofE has a potential to cut rates.

Market Wrap-up

Rosie the Riveter: The July Dallas Federal Reserve District Manufacturing Survey was worse than expected, -17.5 versus estimates of -13.5.

On Deck for Tomorrow: FOMC starts two days of meetings, Case Shiller YOY Home Price Index, FHFA MOM Housing Price Index, JOLTS, Consumer Confidence.