What Happened Last Week?
Bonds Hold On to NFP-Driven Gains Despite Some Push-Back
Whether you view it as a perfectly logical reaction to NFP coming in at 175k vs 243k or a bit too much of a rally relative to the motivation, no one could argue that bond yields were destined to drop after seeing Friday morning’s jobs report. But employment data is only worth so much these days. The main event continues to be inflation and traders were reminded of that with the 10am ISM Services data. The ISM headline was actually rate friendly, but the inflation component was the bigger mover, and it was not friendly. Bonds lost almost all of their post-NFP gains in response, but managed to level off in the PM hours. Combined with the 2 previous days of green, the net effect is the best closing levels since April 9th.
Source: Matthew Graham, Mortgage News Daily 5/3/2024)
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) Treasury Dump, (2) Central Bank Palooza and (3) The Talking Fed.
(1) Treasury Dump: This is yet another record-breaking week in terms of the sheer amount of debt that is being dumped into the market place with $125B needing to be absorbed:
- 05/07: 3-year Note $58B
- 05/08: 10-year Note $42B
- 05/09: 30-year Bond $25B
2) Central Bank Palooza: Of the Central Banks this week, the focus will be on the Bank of England on Thursday.
(3) The Talking Fed: Last week, the FOMC Policy was “hawkish” but Powell was “dovish”. This week’s round of Fed Speak could give bond traders yet another perspective.
- 05/06: Barkin and Williams
- 05/07: Kashkari
- 05/08: Jefferson, Collins, Cook
- 05/09: Balance Sheet
- 05/10: Bowman, Goolsbee, Barr
Market Wrap-up
Overview
There were no domestic economic releases today.
The Talking Fed
NY Fed President John Williams said that it’s “worrisome” when monthly inflation prints come in higher but that “eventually” there will be rate cuts. Richmond Fed President Thomas Barkin said that early 2024 inflation data has been disappointing but the Fed’s monetary policy can win against inflation.
On Deck for Tomorrow
Consumer Credit Change, 3-year note auction, Neel Kashkari.