What Happened Last Week?
Big Market Reaction but Mortgages Outperform
Thursday’s jobs report would have been bad for rates if it was even in line with expectations. After it came out stronger than expected (especially in terms of the unemployment rate at 4.1 vs 4.3 forecast), it was off to the races for bond sellers. The short end of the yield curve has the most in common with Fed rate expectations, so it took the most damage, but MBS fared far better. Perhaps that has something to do with the government not issuing MBS to fund the just-passed spending bill or perhaps it is a nod to this week’s uncertain levels of demand for the scheduled Treasury auctions. Either way, one can’t complain. Friday was closed for the holiday, and this week may as well be a holiday because everyone is waiting for July 15th CPI.
Source: Matthew Graham, Mortgage News Daily 7/3/2025)
What’s on the Agenda for This Week?
Overview
This is a pivotal week with trade, inflation and the Fed.
Three Things
The three areas that have the greatest ability to impact MBS backend pricing this week are: (1) Geopolitical, (2) Inflation Nation and (3) The Talking Fed.
(1) Geopolitical: The bond market is still handicapping the “Big Beautiful Bill” and trade/tariffs will drive markets this week. The latest is that Treasury Secretary Bessent says that there are several trade announcements ahead and the White House is sending out letters to several countries today notifying them of their tariff rate.
(2) Inflation Nation: CPI and PPI are this week as well as Import/Export Prices.
(3) The Talking Fed: The Fed’s July meeting is fast approaching and their “media blackout” period starts this Friday. The bond market will focus on their take on the Jobs data that just hit as well as this week’s round of inflation data. The Fed’s Beige Book will be issued on Wednesday.
Market Wrap-up
Domestic Flavor
There were no domestic economic releases today.
On Deck for Tomorrow: CPI, Core CPI, Empire MFG PMI.
Geopolitical Flavor
Tariffic: The White House sent out seven trade warning letters to: Japan, South Korea, Malaysia, Kazakhstan, South Africa, Laos, and Myanmar.