Weekly Mortgage Overview: 5/8/2023

What Happened Last Week?

Logical NFP Reaction Leaves Range Intact, Bring on CPI

The jobs report came and went without offering anything too terribly interesting for the state of the labor market or the prevailing trading range. In fact, the NFP reaction actually reinforced the trading range by pushing yields squarely above 3.40%. With that, attention turns toward this week’s CPI data to help shed light on the most likely direction of the eventual range breakout. That waiting game occurs against the backdrop of ongoing potential bank drama, which proved itself to be just as much of a market mover as any of the data last week.
Source: Matthew Graham, Mortgage News Daily 5/5/2023)

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) Central Bank Palooza and (3) Treasury Dump.

(1) Inflation Nation: There will be key inflationary readings this week with both CPI and PPI. Expectations are for the MOM readings to rise again with the YOY numbers moving lower.

(2) Central Bank Palooza: The Bank of England is expected to raise their key interest rate by 25 basis points.

(3) Treasury Dump: Traders will focus primarily on Thursday’s 30-year bond auction. Here is the schedule:

  • 05/09: 3-year note
  • 05/10: 10-year note
  • 05/11: 30-year bond

Market Wrap-up

Domestic Flavor

It was a very light day for economic data.

Inflation Nation: The NY Fed published the results of its April Survey of Consumer Expectations, which found that while inflation expectations at the one-year horizon decreased to 4.45% in April from the previous month’s 4.75%, longer-dated inflation expectations. At both the three- and five-year horizons – it rose to 2.89% (from 2.78%) and 2.62% (from 2.54%), respectively.

On Deck for Tomorrow: 3-year Treasury note auction