What Happened Last Week?
Could Have Been Better. Could Have Been Worse.
If the bond market was a Mario Bro, it found a gold star at some point on Wednesday. As Thursday afternoon, the gold star ran out of juice and it’s back to regular old Mario. In other words, astonishing resilience/bullishness has been replaced by a sideways-to-slightly-weaker grind. It could be as simple as the desire among traders to consolidate recent gains without getting too carried away. Ongoing selling in tech stocks ostensibly allowed for another bond rally, so the fact that they lost a bit of ground could end up looking like an important clue about resistance. A mid-day spike in oil prices may have added just a bit of upward pressure in yields, but it’s more likely correlation>causation as oil has been higher all week. Losses were minimal as of 3pm on Friday, leaving most of the week’s rally intact.
Source: Matthew Graham, Mortgage News Daily 10/16/26)
What’s on the Agenda for This Week?
Overview
This week is very light on economic data and zero Fed speak.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing are: (1) Geopolitical, (2) Texas Tea, Black Gold and (3) Debt.
(1) Geopolitical: There is a three ring circus with Ukraine, France and Iran. MBS benefitted greatly from the developments overseas last week.
(2) Texas Tea, Black Gold: Swings in oil prices can be very inflationary and deflationary. While the MBS market is not as granularly linked to oil as it was 3 weeks ago, big swings can still have a major impact.
(3) Debt: There is an important 20-year Treasury bond auction on Wednesday but experts are also watching foreign debt (everyone is staying away from anything French/European) and looks like some corporate bonds may be put on hold.
Market Wrap-up
Taking it to the House: The October Home Builders’ Sentiment fell into a sinkhole by dropping from 32 down to 29.
On Deck for Tomorrow: China Rate Decision, Housing Starts and Building Permits, Pending Home Sales, ADP Employment 4 week rolling average.