What Happened Last Week?
Solid Conclusion to a Solid Week
Bonds benefited from a one-two punch of economic data and stock market weakness on Friday, eventually helping 10-year yields flirt with their lowest levels since December 18th (February 5th and 7th still technically a hair lower). MBS have outperformed over that time, briefly hitting December 13th levels during Friday’s best moments. While the morning gains were clearly tied to the S&P PMI data, afternoon gains came courtesy of a flight to safety with investors dumping stocks aggressively.
Source: Matthew Graham, Mortgage News Daily 2/21/2025)
What’s on the Agenda for This Week?
Three Things
The three areas that have the greatest potential to impact MBS backend pricing this week are: (1) Inflation Nation, (2) Geopolitical and (3) Consumer Confidence.
(1) Inflation Nation: The Fed’s preferred measure of inflation (Core PCE) will be on Friday which is expected to increase by 0.3% on a MOM basis but fall from 2.8% to 2.6% on a YOY basis.
(2) Geopolitical: After Friday’s Coronavirus warning it’s clear the bond market is very reactive to geopolitical news. On the radar this week are tariffs (of course), federal workers required to return to work, DOGE, Ukraine/Russia, Israel/Hamas, etc. Significant and unexpected movements in these and other theaters can have a big impact on pricing.
(3) Consumer Confidence: Following the UofM’s Consumer Sentiment Index, we will get the Conference Board’s Consumer Confidence on Tuesday. A weak report will help pricing but a strong report will erode pricing.
Treasury Dump
Here is this week’s Treasury auction schedule:
- 02/24: 2-year note
- 02/25: 5-year note
- 02/26: 7-year note
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The Dallas Fed regional Manufacturing Survey tanked from 14.1 in Jan down to -8.3 in Feb.
Financial Updates
Report Card: The Chicago Federal Reserve’s National Activity Index dropped from +0.15 in December down to -0.3 in January.
Treasury Dump: Three days of dumping debt into the marketplace kicked off with today’s shorter term 2-year note. $69B went off at a high yield of 4.169% and a bid-to-cover ratio of 2.56.
On Deck for Tomorrow
: Consumer Sentiment Index, Case Shiller HPI, FHFA House Price Index, Richmond Fed Mfg, 5-year Treasury Note.