What Happened Last Week?
Bonds Give Up AM Gains After Powell Speech
Bonds made it through the jobs report in good shape with modest gains intact heading into the PM hours. Things changed after that, with the most obvious turning point coinciding with Fed Chair Powell’s speech. If traders had been hoping to hear Powell express some concern over economic momentum, they were disappointed when he said “the economy is fine. It doesn’t need us to do anything, really.” With that, bonds moved into negative territory and Fed Funds Futures moved back near the week’s weakest levels (indicating slightly lower odds of the next rate cut happening in May).
Source: Matthew Graham, Mortgage News Daily 3/7/2025)
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) Treasury Dump.
(1) Inflation Nation: There will be two key inflation data points with CPI and PPI. The bond market will give the most weight to the CPI data on Wednesday. If this is lower than expected, then there is a shot at finally breaking above this stubborn trading channel. But if it is higher than expected, then it will test the bottom for worse pricing.
(2) Geopolitical: Tariffs, debt ceiling/government shutdown, etc., will remain front and center and get a lot of weight from the bond market.
(3) Treasury Dump: This is a big week for Treasuries as there is the bellwether 10-year note auction on Wednesday but more importantly, the 30-year bond auction on Thursday, which comes after both CPI and PPI are released.
Central Bank Palooza
The Bank of Canada is expected to cut their interest rate by 25BPS on Wednesday.
Market Wrap-up
There were no domestic events today.
On Deck for Tomorrow
JOLTS, Small Business Optimism, 3-year note auction.