What Happened Last Week?
Range-Bound Risks as Rally Hits the Floor
Bonds started the day on Friday in moderately weaker territory. In so doing, 10-year yields are rejecting the opportunity to break below the 1.30% technical level. Notably, they rose above 1.30% just before the 3:00pm close Thursday (the time of day that holds the most weight for technical analysts in day-over-day terms). It remains to be seen how much 1.30% matters. It’s been more of a “center of gravity” for a sideways range recently as opposed to a true pivot point (unlike July). Coincidentally, 1.30% currently lines up with the bottom of the consolidation pattern, and in that regard, the bounce is much more relevant.Source: Matthew Graham, Mortgage News Daily 9/10/21
What’s on the Agenda for this Week?
Overview
Two weeks ago the net change was +5, last week the net change was -4… get the picture?
Three Things
The three areas that have the greatest ability to impact mortgaged backed securities backend pricing this week are: (1) Inflation, (2) Retail Sales, and (3) Geopolitical.
(1) Inflation: Last week’s PPI of 8.3% was very scary. Will that translate to a big spike in Consumer Prices? The headline CPI is projected to hit around 5.3% which is more than double the Fed’s target rate of 2.0%.
(2) Retail Sales: Retail Sales are expected to decline again, this time by -0.8%. Of course a big chunk of that is Autos. Ex-Autos and Retail Sales are expected to decline by -0.2%.
(3) Geopolitical: This is really a grab-bag full of different things. There is the continued surge of the Delta variant, along with (at least) 2 new variants that are making headlines. After last week’s Treasury auctions, we are fast approaching our debt ceiling while the $3.5T non-infrastructure bill continues to concern markets with the newly proposed higher corporate tax rate of 26.5% which would be much higher than our peer nations and crush growth.