What Happened Last Week?
Getting Back to Normal, For a Few Days Anyway
After a decidedly abnormal 6 weeks beginning in early October, bonds began to calm down. This offered some hope that the brisk volatility and selling pressure was subsiding. With 10-year yields closing inside a 3bp range for 5 days in a row, the restoration of normality is basically confirmed. Today’s data didn’t have a big impact, but experts wouldn’t expect it to (based on the mixed signals). Bonds continue waiting on early December data for the next big push in one direction or the other. This week is always a bit of a wild card due to the holiday and month-end, but the fact remains that there are no truly top tier market movers.
Source: Matthew Graham, Mortgage News Daily 11/22/2024)
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Inflation Nation, (2) Consumer Affairs, and (3) The Talking Fed.
(1) Inflation Nation: The Fed’s official measure of inflation (PCE) will be on Wednesday which is expected to rise by 2.8% on a YOY basis in the Core (ex food and energy) reading.
(2) Consumer Affairs: The Conference Board’s November Consumer Confidence Index will be on Tuesday. It is expected to rise to 112.3 which is pretty strong. The higher this reading is, the worse it is for pricing.
(3) The Talking Fed: The Minutes from the last FOMC meeting will be issued on Tuesday.
Treasury Dump
Here is this week’s Treasury Auction schedule:
- 11/25: 2-year note
- 11/26: 5-year note
- 11/27:7-year note
Market Wrap-up
Rosie the Riveter: The regional Dallas Fed Manufacturing Survey contracted by -2.7 versus estimates of -3.0.
The Talking Fed: The October Chicago Federal Reserve National Activity Index showed that our economy contracted by -0.40 versus September’s pace of -0.28 and now has a rolling three month average of -0.24.
Treasury Dump: Three days of dumping debt into the marketplace kicked off with a shorter term 2-year note auction at 1 pm. $69B went off at a high yield of 4.274% and a bid-to-cover ratio of 2.77.
Geopolitical: Bonds and treasuries are very much in tune with President Trump’s pick for Treasury Secretary Bessent.
On Deck for Tomorrow: Case Shiller Home Price Index, FHFA House Price Index, New Home Sales, Richmond Fed Manufacturing, Consumer Confidence, 5YR Auction, FOMC Minutes.