What Happened Last Week?
Another Nice Round Trip For Bonds–Especially MBS
Nothing new or interesting happened Friday in terms of underlying events, news, or data. But the price action itself was a different story. While the moves weren’t extreme, it was nonetheless notable that bonds lost ground in a very intentional way in the morning only to reverse course and make it back to positive territory by the close. Yields are still broadly sideways at long-term highs, but there was a second straight day having closed near the week’s best levels. MBS outperformed Treasuries a bit, and officially turned green by the afternoon even as 10-year yields were a hair higher. It’s all somewhat promising, but not conclusive evidence of “more to come.” This week’s data may play a big role in making last week look like a false start or sneak preview.
Source: Matthew Graham, Mortgage News Daily 10/9/26)
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) The Talking Fed and (3) Texas Tea, Black Gold.
(1) Inflation Nation: Both CPI and PPI will be this week with the focus on CPI which is expected to see the headline rise from 0.4% to 0.6% on a MOM basis. The hotter this reading is, the worse it will be for pricing (and vice versa).
(2) The Talking Fed: The Fed’s Beige Book will be on Wednesday which is prepared 2 weeks before the next FOMC meeting. And Friday begins the Fed’s media blackout period so all Fed speeches this week will get a lot of attention.
(3) Texas Tea, Black Gold: Generally oil prices moderated and fell last week which kept MBS moving sideways. MBS are less sensitive to oil prices now compared to a month ago but it’s still a factor. It’s just that $1 moves are not usually as impactful as they once were but $2 to $3 moves are still impactful.
Market Wrap-up
Domestic Flavor
Taking it to the House: September Existing Home Sales were better than expected, 3.990M units on an annualized basis versus estimates of 3.96M.
Jobs, Jobs, Jobs: ADP 4-week moving average was 24.75K versus the upwardly revised 25.25K from the prior week.
Glass Half Empty: The September NFIB Small Business Optimism dropped from 98.7 to 97.9.
On Deck for Tomorrow
Weekly Mortgage Applications, CPI, Core CPI, Fed’s Beige Book.