What Happened Last Week?
Bonds Scratch Out a Win Amid Dueling Headlines
Bonds remain surprisingly willing to react to the most seemingly insignificant war-related headlines. Today it was the much-debated geographical location of Pakistan’s lead negotiator, Asim Munir, that set the tone. Bonds rallied on early accounts that he was en route to Tehran and pulled back when other headlines suggested he never left Pakistan. Ultimately, yields trickled just barely into positive territory by the end of the holiday-shortened session.
Source: Matthew Graham, Mortgage News Daily 5/22/26)
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) Geopolitical, (2) Inflation Nation and (3) The Talking Fed.
(1) Geopolitical: This week starts off with a possible deal with Iran impacting oil prices and having an inverse effect on MBS.
(2) Inflation Nation: The Fed’s key measure of Inflation, Core PCE, will hit on Thursday and is expected to increase 0.3% on a MOM basis and to 3.3% on a YOY basis. The higher this number is, the worse it is for pricing and vice-versa.
(3) The Talking Fed: Now that new Fed Chair Warsh has been installed, he is rolling up his sleeves and getting to work. There will be plenty of talking Feds this week, and the bond market will continue to focus on handicapping when the new regime will start to hike.
Market Wrap-up
Domestic Flavor
Taking it to the House: The YOY Case Shiller Home Price Index showed at 0.8% annual appreciation rate versus estimates of 1.0%. The MOM FHFA House Price Index increased by 0.1% which matched expectations.
Glass Half Full: The Conference Board’s May Consumer Confidence Index was better than expected, coming in at 93.1 versus estimates of 92.0, plus April was revised higher.
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 4.071% and a bid-to-cover ratio of 2.64.
On Deck for Tomorrow
Weekly Mortgage Applications, ADP, Richmond Fed Manufacturing, 5 year note auction.