What Happened Last Week?
Minimal Deal Drama
Various headlines out of Iran pushed back on the notion that a preliminary peace deal was near the finish line Friday morning. This resulted in modest upward pressure on yields for the first several hours of the day. Then just before 11am, Iran’s foreign minister said the media shouldn’t speculate and that the deal has “never been closer.” Trump subsequently reposted that news. This sent oil prices back toward the day’s lows and helped bonds recover most of the ground lost earlier in the morning. Volatility was minimal in the bigger picture. Experts would expect a much bigger reaction to an official signing–something that could happen in a matter of days or continue to be punted indefinitely.
Source: Matthew Graham, Mortgage News Daily 6/12/26)
What’s on the Agenda for This Week?
Three Things
The three main areas that have the greatest ability to impact MBS backend pricing this week are: (1) Geo Political, (2) The Talking Feds, (3) Central Bank Palooza.
(1) Geopolitical: The week starts off with a US-Iran peace deal. However, it will not be officially signed until Friday so there may yet still be some volatility from either side. If a cease-fire holds, oil prices will most likely fall which is positive for long bonds.
(2) The Talking Fed: New Fed Chair Warsh’s first FOMC Interest Rate Decision and Policy Statement will be issued on Wednesday. This WILL include their Economic Projects (dot plot chart) as well. The market is not pricing in any move in rates at this meeting.
(3) Central Bank Palooza: Key interest rate decisions will be issued from Switzerland, Japan, Australia and the UK. The Bank of Japan is expected to raise their rates.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The June Empire State Manufacturing Index was in positive territory but was much less than forecasts, 5.7 versus 12.5. May Industrial Production dropped from 0.9% down to 0.1% but Capacity Utilization picked up from 76.1% to 76.2%.
Taking it to the House: NAHB Home Builders’ Sentiment remains in the basement with a horrible reading of just 35.
On Deck for Tomorrow
Bank of Japan Interest Rate Decision, ADP Employment, Import and Export Prices, Housing Starts and Building Permits, FOMC starts two days of meetings.