What Happened Last Week?
Weaker Afternoon, But Still Uneventful
Bonds began Friday in decent shape by pushing back against weakness during European hours. MBS were briefly in just-barely-positive territory in the first hour. Things deteriorated very slowly, but very steadily after that. It took the entire trading session for MBS to give up an eighth of a point. 10-year Treasuries had it worse, with yields moving back up near Thursday morning’s highs. Chalk that up to ongoing “curve steepening” (fancy talk for 10-year yields rising faster than 2-year yields, and combine that notion with the fact that the average mortgage trades more like a 5-year Treasury these days). Modest volatility aside, volume and liquidity remained “holiday low. This week brings different risks, mainly due to the chance that some big traders will be able to reposition bond portfolios after 2024 is officially over. These could go either way. The bigger volatility risk won’t show up until the delayed jobs report on January 10th.
Source: Matthew Graham, Mortgage News Daily 12/27/2024)
What’s on the Agenda for Week?
Overview
It’s another light session (in terms of major economic releases) 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) Rosie the Riveter and (3) Market Close.
(1) The Talking Fed: Barkin and Daly will speak this week, which will be the first dose of fed-speak in almost 2 weeks.
(2) Rosie the Riveter: The rust-belt’s bellwether Chicago PMI is this week, which is expected to remain in contractionary territory. It dropped to 36.9.
(3) Market Close: For the second consecutive week, this is a very short trading week with the bond market closing early on Tuesday at 2 pm ET and will reopen on Thursday.