What Happened Last Week?
Waiting Game Returns with Straightforward, Sleepy Friday
Bonds were technically a hair weaker in Thursday’s overnight session, but even if they never improved from those levels, yields still would have been inside the prevailing range (4.0 to 4.12 in terms of the 10-year). As it stands, they did improve a bit, ultimately hitting 4.063 at the lows and holding near there through the close. MBS picked up a microscopic gain as well. All of the above is perfectly reasonable considering the lack of motivation in economic data. Friday’s only report (residential construction) hasn’t moved markets in over a decade. With that, it’s back to waiting for relevant data with the next notable installment not arriving until Thursday.
Source: Matthew Graham, Mortgage News Daily 10/18/2024)
What’s on the Agenda for This Week?
Three Things
The three areas that have the greatest potential to impact MBS backend pricing this week are: (1) The Talking Fed, (2) Central Bank Palooza and (3) Treasury Dump.
(1) The Talking Fed: This is the last week before the Fed’s media “blackout” period that leads up to their November Fed Meeting. So, this is the last chance for Fed speakers to get their opinions out there.
- 10/21: Daly, Logan, Kashkari and Schmid
- 10/22: Harker
- 10/23: Bowman, Barkin and the Beige Book
- 10/24: Hammack
(2) Central Bank Palooza: There will be key interest rate decisions out of China and Canada; both are expected to cut rates. The amount of the cuts and the forward guidance will have an impact on pricing.
(3) Treasury Dump: There is an important 20-year Treasury bond auction on Wednesday at 1 pm ET.
Market Wrap-up
Leading Down: The September Leading Economic Indicators Index dropped to -0.5% versus estimates of -0.3%. Six straight months of declines in the LEI = a recession. This actually marks the 7th straight month.
Central Bank Palooza: The People’s Bank of China dropped their interest rate from 3.35% down to 3.10%. The markets were expecting 3.15%.
On Deck for Tomorrow: Switch to the 6.00 coupon as the Benchmark, Richmond Fed Mfg Index.