What Happened Last Week?
Straightforward, Uneventful Session Caps the Correction
Bonds were in correction mode for almost the entire week. Early trading on Monday morning was the only exception with the unwinding of the Yen carry trade dominating the action. But even then, bonds had given up all of the gains by the close of business on Monday and only continued losing ground through the end of the Treasury auction cycle Thursday. If there’s one day of the week that had the best chance of seeing an end to the correction, Friday would be it. And it was! Dare we say this has all been fairly logical, even if Monday’s initial volatility presented a big curve ball? If things remain logical, the next big move, for better or worse, stands the best chance to find inspiration from Wednesday morning’s CPI data.
Source: Matthew Graham, Mortgage News Daily 8/9/2024)
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) Geopolitical and (3) Retail Sales.
(1) Inflation Nation: Both PPI and CPI are this week with Core CPI getting the most weight. In June, the headline CPI contracted by -0.1% on a MOM basis. Will that be revised or will it stand? The Core CPI MOM reading increased by 0.1% in June and is expected to move up by 0.2% in July.
(2) Geopolitical: The safety trade in bonds is a big part of the pricing structure and there is still a lot of money camping out in bonds. Last week did not see an escalation from Iran, will it hit this week?
(3) Retail Sales: Does last week’s weak Consumer Credit report portend a weak Retail Sales report this week?
Market Wrap-up
Domestic Flavor
There were no domestic economic releases or speeches today.
On Deck for Tomorrow: PPI and Core PPI, Small Business Optimism Index.