What Happened Last Week?
Mortgage Rates Rose Sharply
The average mortgage rate headline among major news networks suggests things improved this week. The average headline is wrong. Don’t blame the news organization in question. They’re just taking part in the longstanding tradition of covering Freddie Mac’s weekly mortgage rate survey. Freddie did indeed report a small drop in rates versus the previous week, but there are several caveats. Freddie’s survey is released on Thursday morning. That might make it seem like timely enough news, even at the end of the week, but the data was already stale when it came out.
Continue reading: Matthew Graham, Mortgage News Daily 8/19/22)
What’s on the Agenda for this Week?
Three Things
The three areas that have the greatest ability to impact mortgage backed securities (MBS) backend pricing this week are: (1) Inflation Nation, (2) The Talking Fed and (3) Rosie the Riveter.
(1) Inflation Nation: The Fed’s key inflation measurement, PCE, will be issued on Friday. The higher this data set is, the worse it is for MBS pricing. Additionally, the bond market will continue to be very sensitive to inflation data and expectations out of Europe.
(2) The Talking Fed: There is a large slate of speeches this week as part of the Kansas City Federal Reserve’s annual Economic Forum in Jackson Hole, WY. Specifically, Powell will speak on Friday right after the PCE data hits.
(3) Rosie the Riveter: Last week was a mixed bag for manufacturing data. This week will be the flash PMIs along with Durable Goods Orders and the Richmond Fed Mfg.
Market Wrap-up
Domestic Flavor
Inflation: Benjamin Nabarro, the chief UK economist at Citi, told clients Monday that it expects CPI inflation to hit a mindboggling 18.6% in January due to soaring natural gas and power costs. This theme has permeated throughout Europe as energy prices skyrocket, and factories are being shut down causing scarcity for raw materials (zinc, aluminum, etc.) which also is pushing prices higher.
On Deck for Tomorrow: New Home Sales, Richmond Fed Manufacturing and a 2-year Treasury note auction.
Central Bank Palooza
The People’s Bank of China cut their interest rate from 3.70% down to 3.60% in a rare move.