What Happened Last Week?
Did Japan Sell Treasuries Friday?
Bonds sold off medium big on Friday in a move that offered little by way of overt explanations. There were reports of “rate checks” in the USD/JPY market–something that can precede the selling of U.S. bonds in order to buy JPY. Notably, there were no reports of actual intervention, but sometimes these things aren’t revealed until the following trading day. If this explains Friday’s weakness (and it’s not clear that it does), it would be good for the U.S. bond market as it would mean 10-year yields still held under 5% despite added, artificial pressure. Causality investigations aside, focus on the fact that 10-year yields held under 5% (albeit just barely), which is right where they were on the Tuesday afternoon before Fed day.
Source: Matthew Graham, Mortgage News Daily 9/18/26)
What’s on the Agenda for This Week?
Three Things
The three areas that have the greatest ability to impact MBS backend pricing are: (1) Geopolitical, (2) The Talking Fed and (3) Treasury Dump.
(1) Geopolitical: There are three fronts that will get a lot of attention: (1) Trump-Xi Summit, (2) Ukraine-Russia talks, and (3) US-Iran. All three really focus on energy prices.
(2) The Talking Fed: Several Feds will speak this week. The bond market is looking for more color on the rate hike and projections, as well as the “stomach” to actually follow through with hikes to combat Stagflation.
(3) Treasury Dump:
- 09/22: 2-year note
- 09/23: 5-year note
- 09/24: 7-year note
Market Wrap-up
Domestic Flavor: There were no domestic economic releases today.
Texas Tea, Black Gold: WTI dropped by $4.24.
On Deck for Tomorrow: ADP Employment, Richmond Fed Mfg and 2-year Treasury note auction.