What Happened Last Week?
Closing Near Week’s Best Levels
If Friday was going to offer any example of scheduled events causing movement in the bond market, it fell to Powell’s Jackson Hole appearance to do the heavy lifting. On that note, everything went off in a logical and fairly ideal way. Powell forcefully confirmed the Fed policy shift despite stopping short of giving any sort of indication on the size of the forthcoming rate cut in September. Bonds rallied instantly upon the release of Powell’s prepared remarks and, in the absence of a Q&A session, that was it for the day. MBS and Treasuries hit their best levels a few moments later and both headed out the door at almost the exact same levels.
Source: Matthew Graham, Mortgage News Daily 8/23/2024)
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) Inflation Nation, (2) The Talking Fed and (3) State of the Consumer.
(1) Inflation Nation: The Fed’s key measure of inflation, Core PCE, will be on Friday. It is expected to rise 0.2% on a MOM basis and remain in the 2.6% to 2.7% range on a YOY basis. If it is below that range, it will put a 50BPS September Fed rate cut more in focus. But if it is higher than that, it will solidify a 25BPS cut.
(2)The Talking Fed: Now that Jackson Hole is over, the markets are continuing to try to front run the size of the Fed’s September cut and any speeches this week will provide some more clarity/direction.
- 08/26 Daly
- 08/28 Bostic, Waller
- 08/29 Bostic
(3) State of the Consumer: Tuesday’s Consumer Confidence report and inflation expectations will be the most important economic release (other than PCE). And the Consumer Sentiment Index will be on Friday.
Market Wrap-up
Rosie the Riveter: The headline July Durable Goods Orders looked great at first glance, up 9.9% vs estimates of 4.5%. But not so fast… that was entirely due to aircraft orders. Durable Goods EX Transportation dropped by -0.2% vs estimates of 0.0%. The August Dallas Fed Manufacturing Survey contracted again, this time by -9.7 after contracting -17.5 in July.
On Deck for Tomorrow: 2-year Treasury note auction, Consumer Confidence, Richmond Fed Manufacturing, Case Shiller HPI and FHFA House Prices.