What Happened Last Week?
Wild Ride on Jobs Day as Fed Speakers Steal The Show
Experts came into jobs report day expecting some clarity on the size of the Fed’s impending rate cut and in hindsight, it’s abundantly clear that traders felt the same way. The only catch is that the lion’s share of the clarity was reserved for a few short comments from Fed’s Chris Waller. The market initially mistook those comments to suggest a 50bp cut, but swiftly reconsidered. In terms of Fed Funds Futures, the volume and volatility surrounding Waller’s comments were FAR bigger than the action surrounding the jobs report earlier in the morning. Ultimately, it was a good enough day for rates with bonds holding modest gains.
Source: Matthew Graham, Mortgage News Daily 9/6/2024)
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) Treasury Dump.
(1) Inflation Nation: There is one more round of heady inflation data before the September FOMC meeting with CPI and PPI. Headline CPI YOY is expected to move from 2.9% to 2.6%, but Core CPI is expected to remain at 3.2%. The bottom line is that the weaker that these data points are, the better it will be for pricing and vice versa.
(2) Central Bank Palooza: The European Central Bank (ECB) is expected to cut their main interest rate by 25 BPS but it will be their forward guidance that moves bonds.
(3) Treasury Dump: There is a huge amount of debt that the marketplace must absorb this week with the bond market very much focused on Thursday’s 30-Year Treasury Bond auction.
- 09/10: 3-year notes $58B
- 09/11: 10-year notes $39B
- 09/12: 30-year bonds $22B
Market Wrap-up
The Consumer: July Consumer Credit jumped by $25.45B versus estimates of $12.0B.
On Deck for Tomorrow: NFIB Small Business Optimism, 3-year Treasury Note auction, Presidential debate.