What Happened Last Week?
Modest Friday Bounce Does Little to Alter Bigger Picture
After a decent mid-day recover, bonds gave up their gains heading into the 3pm close. It’s a level of weakness that demands no explanation in the bigger picture–especially on a Friday afternoon of a week with a rally on every single previous day. Nonetheless, one could make a case for the bump by pointing to things like Senate moving closer to a spending bill vote with reports suggesting slightly more spending than before. Separate headlines involved Trump declaring an end to trade negotiations with Canada–something that might imply inflation pressure to some traders. Friday aside, the week’s theme was one of lower Fed Funds Rate expectations and that will either be amplified or called into question by the key economic reports this week (as well as CPI next week).
Source: Matthew Graham, Mortgage News Daily 6/27/2025)
What’s on the Agenda for This Week?
Overview
This is a holiday shortened week with an early close on Thursday and a full close on Friday.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Geo Political, (2) Jobs, Jobs, Jobs, (3) ISMs.
(1) Geopolitical: The “Big Beautiful Bill” July 4th target is fast approaching and there are major changes to the original Bill out of the House. The bond market will be sensitive to the final version out of the Senate (if it gets out of the Senate).
(2) Jobs, Jobs, Jobs: It’s the first Friday of a new month (July) and that means the BLS jobs data will be issued. Except that it hits on Thursday due to the holiday. NFP, Unemployment Rate, Average Hourly Earnings, ADP, JOLTS, Challenger Job Cuts, Initial Weekly Jobless Claims and more will be issued.
(3) ISMs: ISM Manufacturing and ISM Services will get a lot of attention. ISM Services slipped into contractionary territory last time around which is very unnerving for the bond market. But was it a “one off” or the start of a trend? Experts will focus on Prices Paid and the Employment Index on these as well.
Market Wrap-up
Rosie the Riveter: The bellwether Chicago PMI fell from 40.5 to 40.4 in June versus estimates of 43.0.
The Talking Fed: Atlanta Fed President Bostic said, “I think we actually have some luxury to be patient because labor markets are actually quite solid.” He has penciled in one cut in 2025 and three cuts in 2026.
On Deck for Tomorrow: Fed Chair Powell, ISM Manufacturing, Construction Spending and JOLTS.