What Happened Last Week?
Bond Traders Quickly Revise Their Bullishness
“Revision” is the word of the day as every armchair economist struggles to understand how the NFP revisions could be so big. Given that it’s not 2020 or 2021, Friday’s revisions were indeed on the large side (those years were MUCH larger… 2021’s average NFP revision was 159k). It speaks to a marked deterioration in the labor market or some limitation in BLS manpower/funding or methodology. Either way, markets traded it in a massive way. 2-year yields (more closely linked to Fed Funds Rate expectations) fell almost 30bps! Mortgage rates are back to mid-October levels.
Source: Matthew Graham, Mortgage News Daily 8/1/2025)
What’s on the Agenda for This Week?
Overview
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Geopolitical, (2) Domestic Flavor, (3) Central Bank Palooza. (1) Geopolitical: Fed Gov Kugler has resigned effective August 8th. She did NOT vote nor attend the last FOMC meeting (which is basically her job). Also, President Trump has fired the head of the BLS after the massive NFP revisions. Still very much in the spotlight: the August tariffs come into effect on Thursday and there is a massive push to get new trade deals. (2) Domestic Flavor: The most important economic report this week is ISM Services which accounts for more than 2/3 of our economic engine. Experts will pay close attention to the Employment and Prices Paid components of this report. (3) Central Bank Palooza: The Bank of England is expected to cut by a 1/4 point this week. This is a big week for Treasury auctions with Thursday’s 30-year bond getting the most attention from long bond traders. Rosie the Riveter: June Factory Orders contracted by -4.8% which was less worse than expectations of -5.2% but is a big move lower compared to May’s pace of +8.3%. On Deck for Tomorrow: Trade Balance, ISM Services PMI, 3-year Treasury note auction.Three Things
Treasury Dump
Market Wrap-up