What Happened Last Week?
Not Reading Too Much into Friday’s Weakness
At first glance, with only one report on the calendar, it’s only logical to give Consumer Sentiment credit for sparking Friday’s bond market selling spree. Closer inspection adds nuance. First off, selling began in earnest at 8:20am–the unofficial opening bell for bond market trading and a time of day where inclined sellers/buyers are often lined up and waiting to trade accordingly. Then there’s the fact that the post-data selling didn’t begin until 6 minutes after the data–an odd eventuality given the tendency for reactions to be perfectly immediate. Last but not least, one can entertain several reasons that traders might be interested in moving to the sidelines ahead of this week’s potential geopolitical developments and Fed announcement.
Source: Matthew Graham, Mortgage News Daily 6/13/2025)
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) Geopolitical, (2) Central Bank Palooza and (3) Retail Snails.
(1) Geopolitical: Israel/Iran will continue to dominate the landscape as will correlating oil price changes. The “Big Beautiful Bill” and deficits are still very much in focus as well. There is also a very important G7 meeting this week.
(2) Central Bank Palooza: The Federal Reserve Open Market Committee (FOMC) will give their latest Interest Rate Decision and Policy Statement on Wednesday at 2 pm ET. While no one expects a rate move at this time, they do issue their Summary of Economic Projections (dot plot chart) which is their key method of communicating future Fed action. This will be followed by a live presser with Fed Chair Powell. But our Fed is not the only Central Bank this week, there will also be key interest rate decisions and policies from the Bank of Japan and the Bank of England.
(3) Retail Snails: After a relatively flat Retail Sales report in April, the May headline reading is expected to dip to -0.6% with the core around 0.2%.
Treasury Dump
There is an important 20Y Treasury Bond auction today.
Market Wrap-up
Rosie the Riveter: The June NY Empire Manufacturing Index fell off a cliff, down 16.
Treasury Dump: The 20-year Treasury Bond auction was at 1 pm. $13B went off at a high yield of 4.942% and a bid-to-cover ratio of 2.68.
On Deck for Tomorrow: Retail Sales, Import and Export Prices, Industrial Production and Capacity Utilization, NAHB Sentiment Index, FOMC starts two days of meetings, Bank of Japan Interest Rate Decision.