What Happened Last Week?
Paradoxical Rally Gets Logical After Retail Sales
If Thursday’s PPI-driven rally was a paradox, Friday’s continuation was quite the opposite. While it’s not the most reliable market mover among economic reports, Retail Sales can occasionally go big. Friday was such an example. Including or excluding the auto sector, sales dropped at the fastest pace in just over year and missed forecasts by the widest margin in several years. That provided a clear mandate for bond traders to press the happy button, ultimately ushering yields to the lowest levels of the week.
Source: Matthew Graham, Mortgage News Daily 2/14/2025)
What’s on the Agenda for This Week?
Overview
This is a very light week in terms of economic data.
Three Things
The three areas that have the greatest ability to impact MBS backend prices this week are: (1) Geopolitical, (2) The Talking Fed and (3) Central Bank Palooza.
(1) Geopolitical: Will dominate the marketplace with executive orders, tariff clarifications and threats, DOGE, negotiations with Russia, Gaza/Hamas, etc.
(2) The Talking Fed: The Minutes from the last FOMC meeting will be issued on Wednesday but there are also a lot of speeches/interviews this week:
- 02/18: Barr, Daly
- 02/19: FOMC Minutes, Jefferson
- 02/20: Goolsbee, Musalem
- 02/21: Jefferson
(3) Central Bank Palooza: Key interest rate decisions will be issued out of China, Australia and New Zealand.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The February Empire (NY) Manufacturing Index improved from -12.6 all the way up to 5.7. However, Prices Paid shot up to very high levels.
Taking it to the House: According to the NAHB, Home Builders’ Sentiment fell again, this time from 47 down to 42.
Central Bank Palooza
The Reserve Bank of Australia cut their main interest rate by 25BPS.
On Deck for Tomorrow
Weekly Mortgage Applications, Building Permits and Housing Starts, Atlanta Fed Business Inflation Expectations, FOMC Minutes, 20Y Treasury Bond Auction.