Bonds Looking Better This Week, But Risks Remain

Today's release of FHFA's home price index showed a sharp acceleration in price growth, with the annual total at 8.0% by the end of August.  If prices completely stopped moving up in Sept, that puts new conforming loan limits on pace for $545k+.  Meanwhile, with a 2nd straight day of gains, the bond market is making case for a supportive shift, but risks remain.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Durable Goods 1.9 vs 0.5 f'cast, 0.4 prev

  • Core Durable Goods 1.0 vs 0.5 f'cast, 2.1 prev

  • FHFA Home prices (y/y) +8.0 vs +6.5 prev

  • Case Shiller Home Prices (y/y) 5.2 vs 4.1 prev

  • Consumer Confidence 100.9 vs 102 f'cast, 101.3 prev

Market Movement Recap
08:51 AM

Bonds were modestly stronger overnight, with some analysts citing "ongoing concerns about a 2nd wave of covid cases."  That's an oversimplification even if it is having an effect.  It could simply be that bonds had exhausted enough of their negative momentum for October that it was time to level off.  Either way, positive momentum is intact with yields down nearly 2bps now at .784 and 2.0 UMBS up 2 ticks (.06) at 103-05 (103.16).

12:37 PM

Treasuries continued to rally and the Fed's 30yr fixed UMBS buying operation was med with light supply from sellers (11:30-11:50am).  That explains a recent pop in MBS prices starting at 11:50am.  2.0 UMBS are now up an eighth of a point on the day and 10yr yields are down nearly 3bps.  Stocks are roughly unchanged (S&P futures).

04:05 PM

Both MBS and Treasuries have flattened out since  the last update.  They're both at the same levels, holding the morning's moderate gains.  The stock market is also chopping around in a similar range.  The 2yr auction was a non-event and there haven't been any salient market movers in play.