This is Matt Graham with the MBS Live Market Update. Last week was another interesting one for the bond market, but one in which bonds ultimately calmed down and ended up returning well within the previous range and by previous range we’re referring to that, which was in effect before the April 2nd tariff announcements. But there was certainly some volatility getting back to those levels and it began at the end of the previous week with Trump making attacks on Fed Chair Powell saying that he would like to fire him in not so many words and also that rates need to be lower. The bond market did not like that 4x didn’t like it. Dollar valuations versus foreign currencies fell rapidly into Monday morning to their lowest levels in quite some time, and bond yields spiked fairly noticeably. Then a day later, that statement or those statements were more or less walked back and markets started to calm down. In addition to walking back the comments on Powell, Trump also mentioned progress or willingness to make progress in a trade deal with China? There were various comments throughout the week regarding tariffs being not quite as high as initially announced, and generally a sense that there will be more compromise and rationality applied to tariff negotiations and decisions then initially feared and financial markets appreciate that it helped both stocks and bonds move back to stronger levels. We’re definitely not out of the woods yet because there are certainly tariffs in effect now that weren’t in effect before April 2nd and those are definitely having an impact on importer and exporter decisions as seen in several recent pieces of economic data, both surveys and actual. Purchasing managers indices we had the S&P Global PMMI show sharp increases in prices, and now this week we’re in a position to perhaps see the same thing in the ISM version of the data, which tends to be a bigger market mover in the us. We also had. Dallas Fed manufacturing out this morning with the lowest business activity reading since May of 2020 and if you remember May of 2020, that was not a great time. But unlike then, the current drop in such numbers is more related to uncertainty rather than a complete shutdown of the economy. While there will probably be some lasting effects from that if the uncertainty can be cleared up, then we would assume that we could see a reversal in most of the deleterious effects of recent tariff related uncertainty. Then there’s the matter of economic data to consider. We did definitely see a reaction to the inflation implications in S&P PMI last week, and that was an important proof of concept in an environment where one could have easily made the case that econ data is more or less out the window and all eyes were on tariff related announcements. So S&P PMI let us know that traders are definitely willing to trade the data, and now this week we have a lot more data on the way. Today is the only day without a big ticket economic report, but we do have the Treasury’s quarterly refunding financing estimates this afternoon at 3:00 PM Eastern and then we have big ticket economic data on each of the following days. Highlights include job openings on Tuesday morning, and then Wednesday we have a DP jobs, employment costs, a new reading of GDP for Q1. That’s the first reading for Q1. And we’ll also get PCE prices on Wednesday. Typically, that doesn’t come out on the same day as GDP. We usually get the quarterly PCE in conjunction with GDP, but usually we wait a day before getting the monthly version. We’ll get them both on the same day and not quite at the same time. This time it’s at 10:00 AM instead of 8:30. When we’re looking at the PCE price index, a lot of acronyms and abbreviations there thrown at you. But the important point there is that Wednesday morning has a plethora of econ data. Thursday morning, ISM manufacturing is the big to do at 10:00 AM Eastern, and Friday is the big jobs report. Always the biggest potential market mover on the first week of any given month. In the bigger picture and against the technical backdrop, bonds are trading well now. Definitely, again, back within the pre tariff announcement range marked by 10 year yields between roughly 4.2 and 4.35. Don’t expect to remain in that range forever and don’t expect to know which direction the breakout will occur in until we see what the data says and how trade negotiations evolve. That’s gonna do it for this week. Back to you.
Matt Graham, Founder and CEO, MBS Live
Matt began as an originator in 2002. He fell in love with the idea of following MBS in real-time but felt that existing products were only scratching the surface. Thus was born MBS Live in 2007, the first-of-its-kind platform with real-time market data/analysis, and live chat with analysts, traders, and originators around the country. He is currently the Founder and CEO of MBSLive!
He’s been covering bond/mortgage markets, writing commentary, alerts, and chatting with the live community every business hour of every business day ever since.
Matt also serves as the Chief of Operations for mortgagenewsdaily.com, where he is one of the industry’s most respected mortgage rate experts, frequently quoted in the media. Mortgage News Daily’s rate index is used as the definitive resource on day-to-day mortgage rate averages.
He lives in the Pacific Northwest with his wife and son where he enjoys skiing, fishing, coaching youth sports, playing the guitar, and more DIY projects/hobbies than he’d care to admit.