Eary End-of-Trading Day: Risk was on in today's abbreviated trading session. Markets closed early for the holiday. The ISM and construction numbers both surprised to the upside, pushing equities higher and bonds lower. The 10-year yield jumped to 2.34% and MBS was pushed down -22 bps. The end of the week is nothing to wink at with payrolls and oil still in turmoil. We'll see where Wednesday takes us.
Note: After initial post, I received two alerts before the markets closed (early) that the FNMA 30-YR 3.5% coupon is -15 BP (-30 BP for the day, currently 102.375). This could lead to unfavorable re-pricing (higher interest rates).
What's going on and why does it matter?
Mortgage bonds are starting to rebound after bouncing off their 100-day moving average on Friday. The market closes early today and it's closed tomorrow for Independence Day. We may see a quiet start to this week because many market participants are out on an extended break. The Fed is not scheduled to buy any mortgage bonds today, but they'll be back in the market on Wednesday with a $1.05 billion purchase of GNMA mortgage bonds. The market may get volatile starting on Wednesday because the minutes from last month's Federal Reserve meeting will be released on Wednesday afternoon. We also have the ADP employment numbers on Thursday, and the all-important non-farm payrolls report on Friday. As for today, the ISM manufacturing index and some construction spending numbers are scheduled to be released later this morning.
What should you do about it?
Watch for bond prices to continue rebounding from these levels, but be prepared to lock your rate if bond prices break below their 100-day moving average.
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Economic reports that may impact mortgage rates this week:
| Date | Report | Period | Prior | Estimate | Actual |
Mon
3 Jul | Construction
Spending | May | -1.4% | 0.3% | |
Mon
3 Jul | ISM Mfg.
PMI | June | 54.9 | 55.2 | |
Mon
3 Jul | Total
Vehicle Sales | June | 16.66M | 16.55M | |
Wed
5 Jul | Factory
Orders | May | -0.2% | -0.5% | |
Wed
5 Jul | Fed Minutes | June | - | - | |
Thu
6 Jul | ADP National
Employment | June | 253,000 | 188,000 | |
Thu
6 Jul | Initial Jobless
Claims | Week of
June 26 | 244,000 | 242,000 | |
Thu
6 Jul | ISM
Non-Mfg PMI | June | 56.9 | 56.5 | |
Fri
7 Jul | Non-Farm
Payrolls | June | 138,000 | 180,000 | |
Fri
7 Jul | Average
Earnings | June | 0.2% | 0.3% | |
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