What Happened Last Week?
What’s Up with the Big Bond Rally Despite Higher Inflation?
It was one thing when bonds were only modestly stronger after Friday morning’s inflation data. But 10-year yields went on to drop 12.7bps to the day at the lowest levels of the week (4.235%) and MBS rallied nearly 3/8ths of a point. The magnitude of the additional improvement demands additional explanation. On a speculative note, it’s a strong possibility that the month/quarter-end positioning is playing a role. On a more obvious note, stocks tanked and there’s a strong tendency for friendly spillover to bonds when stocks sell this much.
Source: Matthew Graham, Mortgage News Daily 3/28/2025)
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) Tariffic, (2) Jobs, Jobs, Jobs (3) Domestic Flavor.
(1) Tariffic: The biggest factor in bond yields this week will come from the April 2nd (and beyond) tariffs and the escalating trade war.
(2) Jobs, Jobs, Jobs: Big Jobs Friday is this week. It will be interesting to see if there is any impact with the massive government downsizing.
(3) Domestic Flavor: Outside of Jobs data, the ISMs will get the most weight from bonds.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The March bellwether Chicago PMI was still in contractionary territory (sub-50) but was a little better (less worse) than expected: 47.6 versus estimates of 45.4. The Dallas Fed Manufacturing Business Index fell off the face of the Earth by falling 16.3.
On Deck for Tomorrow: JOLTS, ISM Manufacturing, Construction Spending.