What Happened Last Week?
Bonds Close Out Epic Week of Resilience with Friendly Data
Friday was a logically friendly day thanks to slightly lower CPI. But no matter what happened on any of the other 4 days, last week was all about bonds ending up at much stronger levels in spite of a jobs report that should have sent rates higher on Wednesday. Ironclad justification remains impossible, but the leading theory involves heavy liquidation mode in stocks/commodities on Thursday. Holiday weekend positioning could also be a factor. As such, a lot more can be learned tomorrow–especially if stocks find a reason to stage a big bounce.
Source: Matthew Graham, Mortgage News Daily 2/13/26)
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Inflation Nation, (2) The Talking Fed and (3) Geopolitical.
(1) Inflation Nation: The Fed’s official key measure of inflation, Core PCE, will be on Friday. Estimates call for the YOY Core reading to rise from 2.8% to 3.0%. It will take a big miss to the downside for MBS to see a meaningful improvement from this release.
(2) The Talking Fed: The Minutes from the last FOMC Meeting will be on Wednesday and there will be plenty of talking Feds all week.
(3) Geopolitical: The bond market is reflecting a higher potential for escalation with US/Iran. The Supreme Court may also make a decision on tariffs by Friday.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The February Empire State Manufacturing Index was in positive territory for the second consecutive month with a reading of 7.1.
Taking it to the House: The Feb NAHB Home Builder’s Confidence dropped from 37 down to 36. Wah wah.
On Deck for Tomorrow
Weekly Mortgage Applications, Housing Starts and Building Permits, Industrial Production and Capacity Utilization, The Minutes from the last FOMC meeting, Atlanta Fed Business Inflation Expectations, 20-year Treasury Bond auction.