What Happened Last Week?
Bonds Finally Trade Something Other Than the War
The bond market saw a roughly identical amount of volatility on each of the last 2 days of the week, but Friday’s version played out in a friendlier direction. Headlines suggested improved prospects of peace negotiations over the weekend. While there is no scheduled talk with the US and Iran, high level reps from both sides are currently–or soon will be–in Pakistan. But the war headlines only get part of the credit. Bonds also got a boost from news that the DOJ dropped its case against Powell, thus paving the way for a Warsh confirmation. In the market’s view, this improves the odds of a rate cut in 2026, even if only slightly. Two-year yields rallied much more than 10s, as one would expect when markets are trading Fed rate expectations.
Source: Matthew Graham, Mortgage News Daily 4/24/26)
What‘s on the Agenda for This Week?
Overview
This is a very big week for economic data and central bank action.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Geopolitical, (2) Central Bank Palooza, (3) Inflation Nation.
(1) Geopolitical: Yes, this will continue to dominate the direction of the bond market this week as Iran/Straight/etc. will continue to impact both import prices and flight to safety.
(2) Central Bank Palooza: There will be activity from 5 major Central Banks this week. The market will focus on our own Federal Reserve which will give us their Interest Rate Decision and Policy Statement on Wednesday at 2 pm ET. All eyes will be on Fed Chair Powell’s speech afterwards. But we are not the only game in town as there will also be rate decisions from the Bank of Japan, Bank of Canada, Bank of England and the European Central Bank.
(3) Inflation Nation: The Fed’s key measure of inflation (Core PCE) will be on Thursday. The Headline is expected to almost double from the prior month, but the Core expected to rise only from 0.3% to 0.4%.
Market Wrap-up
Rosie the Riveter: The April regional Dallas Fed Manufacturing Survey took a turn for the worse by dropping from -0.2 to -2.3.
Treasury Dump: There were two auctions today. The 2-year note saw $69B go off at a high yield of 3.812% and a bid-to-cover ratio of 2.65, while the 5-year note was $70B, 3.955% and 2.33.
On Deck for Tomorrow: The FOMC starts two days of meetings, ADP Employment Change, Case Shiller YOY, FHA HPI MOM, Consumer Sentiment, Richmond Fed Mfg, 7-year Treasury note auction, BOJ Interest Rate Decision.