This is Matt Graham with the MBS Live market update. Last week was less eventful for the bond market than the previous week, and in many ways it represented an opportunity to calm down, consolidate, and collect itself before moving on to whatever’s next. It was shortened by a holiday by a day and a half. That’s typical of federal holidays where the bond market will close early on the day before the observed holiday and then be fully closed the next day. Although there are some exceptions, like Thanksgiving for instance. That’s generally the way it works, and it can affect trading patterns and investor decision making because of liquidity and volume. In other words, if I know that it’s going to be shorter than normal week and that other traders and other market participants might not be as tuned in as they otherwise would be, it might affect the trading decisions I make. I might want to get to a more neutral point a little bit earlier on, or simply try not to stray too far from what it seems like everybody else is doing. Either way, we had fewer sensational headlines surrounding fiscal policy and tariffs and financial markets were relieved by that we had stability in US dollar versus foreign currencies, which has been key expression of the global markets response to tariff policies. That flat line coincided with the bond market recovering from its Uyghur levels seen at the end of the previous week when 10 year yields got all the way up near 4.6 and they ended the week down near 4.3 and change. So a decent recovery in bond yields and one that was largely facilitated by an absence of news as opposed to the appearance of new news. One could make a case that the headlines regarding potential trade deals and exemptions for certain tariffs was helpful for the bond market, and I think that it would be an easier case to make if we saw the same level of benefit in the stock market, which wasn’t necessarily the case. In fact, stocks mostly went sideways at the beginning of the week before trailing off toward the end of the week, and they largely mirrored and matched the pace of declines in treasury yields. I would suggest the market is a little bit less concerned about the most apocalyptic outcomes surrounding tariff announcements and getting back into the stance of trading it from an economic fallout standpoint. IEA weaker economy pushes bond yields lower and stock prices lower in unison. But lest we be lulled into a false sense of security by a mostly uneventful week heading into the weekend, the drama reemerged with the President. Once again, levying harsh criticism on Fed chair Powell saying that he needs to cut rates and other insults. I guess you could only really describe it as that, and the global financial market doesn’t care for that kind of stuff. No matter what anybody’s opinion is of the Fed, the global financial market views that as a less political source of financial stability in the US and in the global economy and so it had an immediate impact on the dollar versus other assets. It also pushed bond yields slightly higher. It continued to push stocks lower. And renewed headlines again this morning are having a similar impact. It remains to be seen how all of that shakes out. We don’t have a comment on whether or not the president can or will try to quote unquote Fire Powell, but we do know that would almost certainly end up in the Supreme Court and probably not be very good for the bond market longer term. Hopefully we don’t see that because it is the sort of thing that would be better resolved in other ways. Ones that don’t create as much uncertainty for global financial markets. As far as economic data this week, it’s not an incredibly heavy week in terms of big ticket data, but there are quite a few line items on the calendar, numerous sped speakers throughout the week. We do have the two, five and seven year treasury auction cycle. Home prices come out on Wednesday and new home sales also on the same morning S&P Global services and manufacturing PMI on Wednesday morning as well and that would probably be one of the bigger reports of the week because it’s the preliminary release of that data and that’s the one that tends to have a bigger impact than the final release with us, as always is jobless claims. On Thursday, we’ll also get durable goods, which hasn’t been a big market mover in general. Also not a market mover, existing home sales at 10:00 AM on Thursday, but interesting to the housing market nonetheless. And last but not least, consumer sentiment. On Friday hit and miss as a market mover. But interesting to watch the evolution of inflation expectations among consumers. Something that doesn’t seem like it should matter, but often does for the bond market 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.