What Happened Last Week?
Strongest Close of the Week After Well-Contained Month-End Volatility
There was always a reasonably high bar for Friday’s econ data to have a big impact. When it came out right in line with expectations in the morning, that ship sailed. That left the month-end trading environment as the most likely source of inspiration. While there was certainly some evidence of month-end volatility, it played out in a narrow range. More importantly, it resolved with bonds at the strongest levels of the week, even if by only a small margin.
Source: Matthew Graham, Mortgage News Daily 5/30/2025)
What’s on the Agenda for This Week?
Overview
This is a very big week with lots of economic data.
Three Things
The three areas that could have the greatest impact on MBS backend pricing this week are: (1) Geopolitical, (2) Jobs, Jobs, Jobs and (3) Central Bank Palooza.
(1) Geopolitical: Deficits and tariffs will continue to drive long bond yields. This morning, steel imports tariffs are set to go from 25% to 50%, China and U.S. negotiations appear to be fizzling and despite “peace” talks between Ukraine and Russia this week, and there was a big offensive by Ukraine over the weekend.
(2) Jobs, Jobs, Jobs: There is a ton of labor, job and wage related data all week-long culminating in Big Jobs Friday. The bond market will be looking to see if government cuts (which also impacts the private sector as there are multiple private sector jobs that get impacted for each cut in a government program) will show up in the NFP data.
(3) Central Bank Palooza: The Bank of Canada is expected to stand pat and the European Central Bank is expected to cut. Our own Federal Reserve will release their Beige Book on Wednesday.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: May Headline ISM Manufacturing PMI was lighter than expected, 48.5 versus estimates of 49.5. The Employment Index rose a smidge from 46.5 to 46.8. Prices Paid remained in extremely elevated levels but moved off last month’s pace of 69.8 to 69.4.
Bob the Builder: April Construction Spending lost its foundation (pun intended) by dropping -0.4% versus estimates of +0.3%.
On Deck for Tomorrow: JOLTS, Factory Orders.
The Talking Fed
Fed Chair Powell delivered his remarks today at the Fed’s 75th Anniversary Conference — but no major hints on rate cuts or policy changes. He focused mainly on the global economic role of the Fed’s research team.