What Happened Last Week?
Incidental, Inconsequential Weakness Ahead of Fed Week
Bonds began the day on Friday in modestly weaker territory and yields are right in line with the opening levels from Monday. This broadly suggests the market got where it was going after the jobs report and is now waiting for the next big shoe to drop. The other way to view the entire week is as an opportunity to book profits and cover shorts on the recent “steepening” trade (which favored buying 2s over 10s). Indeed, 2-year yields mostly sold off last week relative to 10s and Friday was the only real exception. Either way, there was no concrete cause and effect in the news or econ calendar, so chalk it up to position squaring ahead of this week’s Fed day.
Source: Matthew Graham, Mortgage News Daily 9/12/2025)
What’s on the Agenda for This Week?
Overview
This is a very pivotal week with our Fed.
Three Things
The three areas that have the greatest potential to impact MBS backend pricing are: (1) The Talking Fed, (2) Central Bank Palooza and (3) Retail Sales.
(1) The Talking Fed: This is the big-kahuna of the week. By Tuesday morning will Miran join the FOMC and/or is Cook is out? Regardless, the FOMC is meeting on Wednesday with an expected rate cut of 25BPS. But the key will the release of their Economic Projections (dot plot chart). Will this show one or two more cuts for 2025?
(2) Central Bank Palooza: Our Fed is not the only game in town this week as there will be important Interest Decisions and Policy Statements out of the Bank of Canada, Bank of England and the Bank of Japan.
(3) Retail Sales: The biggest data point of the week will be Tuesday’s Retail Sales. There was a big jump in Consumer Credit last week. Will that translate to more spending?
Treasury Dump
There is an important 20-year Treasury bond auction on Tuesday.
Market Wrap-up
Rosie the Riveter: The Empire Manufacturing Index was worse than expected by contracting -8.7 versus estimates of +3.0.
On Deck for Tomorrow: Retail Sales, Retail Sales Ex Autos, Import and Export Prices, the FOMC starts two days of meetings, 20-year Treasury bond auction.