What Happened Last Week?
Incidental Weakness, Bigger Considerations on the Horizon
Without any data or compelling market movers, bonds came into the daylight on inspiration. Low volume/liquidity left the door open for any determined traders to have a bigger-than-normal influence on the market. That arguably happened Friday with both stocks and bonds losing ground simultaneously. This coincided perfectly with an uptick in Fed rate hike expectations seen via near-term Fed Funds Futures.
Source: Matthew Graham, Mortgage News Daily 8/21/26)
What’s on the Agenda for This Week?
Overview
The Treasury and the Fed will take center stage this week.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Geopolitical, (2) Inflation Nation and (3) The Talking Fed.
(1) Geopolitical: Oil prices will continue to garner a lot of attention from the long bond market as a tide that lifts all inflation boats. This week kicks off with Economic D-Day for Iran according to Treasury Secretary Bessent. Bessent will also speak on the Treasury’s plan to buy back long bonds. There is also a fresh fight to the north as Canada and the US are swapping tariffs.
(2) Inflation Nation: The Fed’s key metric of inflation will be on Wednesday with headline and Core PCE.
(3) The Talking Fed: The second half of the week will see the annual Economic Symposium in Jackson Hole, WY. This is actually an official FOMC meeting held by the St. Louis Fed. Fed Chair Warsh will speak Friday.
Market Wrap-up
Domestic Flavor: There were no domestic economic releases today.
Treasury: Treasury Secretary Bessent unveiled “Operation Economic Outcast” which is a sweeping economic offensive targeting Iran and anyone trading, banking or transacting with Iran. Bessent also stated that the Treasury may decide to use its own cash to buy longer term bonds and would not have to issue more debt.
On Deck for Tomorrow: ADP 4 week moving average, New Home Sales, Consumer Confidence, 2 year note auction.