What Happened Last Week?
Calm and Slightly Stronger, but Volatility Will Be Back
Once or twice per week, the bond market manages to post a fairly calm trading day against the prevailing backdrop of generally higher volatility. Friday was such a day. The most helpful catalyst was an absence of any major war-related headlines and associated oil price volatility. That said, it’s a near certainty that war-related volatility will be back this week.
Source: Matthew Graham, Mortgage News Daily 5/8/26)
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Geopolitical, (2) Inflation Nation, (3) Retail Sales.
(1) Geopolitical: Over the weekend the One-Page Memorandum of Understanding (which was the basis for further discussion on ending the war) turned into a multipage response from Iran that really didn’t agree to anything. The turmoil and swings in oil prices will continue to be a large factor in pricing this week.
(2) Inflation Nation: Both CPI and PPI will be this week as well as Import Prices. The most weight will be on MOM CPI Core.
(3) Retail Sales: The April Control Group for Retail Sales will get the most weight among bond traders. The stronger this number is, the worse it will be for pricing (and vice versa).
The Talking Fed
Warsh should be installed as the new Fed Chair by Friday.
Treasury Dump
There is a lot of debt hitting the marketplace this week with Wednesday’s 30-year bond getting the most attention.
- 05/11: 3-year note
- 05/12: 10-year note
- 05/13: 30-year bond
Market Wrap-up
Taking It to the House: April Existing Home Sales were 4.02M units on an annualized basis versus estimates of 4.05M and a March pace of 4.01M.
Treasury Dump: Three days of dumping debt into the marketplace kicked off with today’s shorter-term 3-year note auction. $58B went off at a high yield of 3.965%.
On Deck for Tomorrow: CPI, Core CPI, 10-year Treasury note auction.