What Happened Last Week?
Uneventful Friday, Even if Slightly Weaker
Friday’s trading session was the most uneventful of the week. It began with moderate losses in the overnight session in concert with stock market gains. Some traders attributed this to improved odds of avoiding a government shutdown by the night’s deadline. The only scheduled economic data was the Consumer Sentiment report which has fallen by the wayside to some extent as the results are increasingly discounted as being clouded by political affiliations of respondents. Nonetheless, the uptick in inflation expectations was notable and worth a bit of extra weakness in bonds at the time. Even so, bonds remain well within the range set by Thursday’s trading. The result is an “inside day” in market jargon, which one could either read as “indecisive” or “boring. We’d lean toward the latter.
Source: Matthew Graham, Mortgage News Daily 3/14/2025)
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) The Talking Fed, (2) Central Bank Palooza and (3) Retail Sales.
(1) The Talking Fed: The FOMC’s Interest Rate decision and Policy Statement will be on Wednesday at 2 pm ET. This is also a FOMC meeting where they issue their Summary of Economic Projections from which the famous “dot plot” chart is derived. Then there will be a live presser with Fed Chair Powell. The bond market does not expect any actual policy change at this meeting; however, the forward looking economic projections could have a big impact on pricing.
(2) Central Bank Palooza: Our Fed is not the only game in town this week. There are also very key interest rate decisions out of The Bank of Japan, The People’s Bank of China, The Bank of England and The Swiss National Bank.
(3) Domestic Flavor: Monday’s Retail Sales report is the most important domestic data point of the week.
Treasury Dump
There is an important 20-year Treasury bond auction Tuesday.
Market Wrap-up
Domestic Flavor
Retail Snails: Headline February Retail Sales were only up 0.2% versus estimates of 0.7%. Ex Autos, they are up 0.3% versus estimates of 0.5%. This is generally favorable to bonds and backend pricing; however, the Control Group which feeds into the GDP calculation moved from -1.0% in January to +1.0% in February. This relative strength was negative for pricing.
Rosie the Riveter: The March NY Empire Manufacturing PMI report absolutely CRATERED, falling from +5.7 down to -20. The concern for the bond markets is that Prices Paid (a measure of inflation) shot up to its highest level in over 2 years.
Taking it to the House: The March NAHB Home Builders Sentiment Index dropped back below 40 with a reading of 39.
On Deck for Tomorrow
The FOMC starts two days of meetings, Housing Starts and Building Permits, Import and Export Prices, Industrial Production and Capacity Utilization, 20Y Treasury Bond auction.