What Happened Last Week?
Respectable Recovery. Is It a Trap?
First thing’s first: the parabolic flourish of bond selling of the past 2 weeks is arguably unprecedented in recent memory. Specifically, there have been similar levels of overall weakness over similar time frames, but not in the same sort of concentrated acceleration of selling at the tail end of a months-long selling trend. The only remotely comparable precedent was late September 2023 when a Fed dot plot surprised the market with a higher rate outlook followed by 2 weeks of stronger-than-expected econ data. There was a decent recovery on several occasions on the way up, but a sustainable recovery didn’t start until early November. Throughout that process, it was data that set the tone. With that in mind, this is a week with big-ticket data and bonds are expected to take cues accordingly. Of course, oil and war headlines continue to matter as well. While Friday’s recovery was “nice,” it doesn’t make any guarantees about where things will end up this week. That said, it very well could indicate that bonds have sold as much as they need to sell unless this week’s data/events add additional provocation.
Source: Matthew Graham, Mortgage News Daily 9/25/26)
What’s on the Agenda for This Week?
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Inflation Nation, (2) Jobs, Jobs, Jobs and (3) Texas Tea, Black Gold.
(1) Inflation Nation: The Fed’s preferred measure of Inflation, PCE, will be on Wednesday. Both the headline and Core (ex-food and energy) are expected to grow at a faster pace than the prior month. Bond yields are extremely sensitive to this release. Prices Paid will be part of Friday’s ISM Manufacturing report.
(2) Jobs, Jobs, Jobs: There will be a ton of job and wage related data all week long that culminates in Big Jobs Friday. The last NFP report really pressured pricing as it was hotter than expected. The revisions to last month and the prior month will get a lot of weight as will the Average Hourly Earnings.
(3) Texas Tea, Black Gold: Oil prices (as well as diesel) will continue to get a lot of attention by all the markets. Higher oil for longer has been a real factor in MBS pricing.
Market Wrap-up
Rosie the Riveter: September Dallas Fed Manufacturing survey was higher than expected, 9.8 versus estimates of 6.0.
Texas Tea, Black Gold: WTI started the day on an upswing but has since leveled off.
On Deck for Tomorrow: JOLTS, Consumer Confidence, Case Shiller and FHFA HPI.