Last Friday's AM commentary had a detailed write-up on the significance of "month-end bond buying." Here's a link to that, and here's a link to our primer on the topic.  With today being the last day of July, it's possible we'll still see some random momentum due to the month-end process, but would expect a relatively higher proportion of traders to have gotten those housekeeping trades out of the way last week given the generally lower liquidity of summertime Mondays.

The week ahead is no slouch though!  There is a slew of top tier economic data, and some of it is exceptionally important.  Specifically, tomorrow morning brings the Fed's favorite inflation gauge: year-over-year Core PCE.  They'd like that to be at 2% in a perfect world.  It's currently at 1.4%, down from 1.8% 4 months ago.  This drop from "nearly 2.0%" is part and parcel of the Fed's more dovish tone in recent months.  Any meaningful move back toward higher levels could be taken as an early sign that the recent slowdown in inflation is indeed "transitory."  

As is typically the case for the first week of any given month, we'll also get ISM data, ADP Employment, and Nonfarm Payrolls.  Markets are somewhat less focused on employment metrics currently, because the Fed's big problem is inflation.   While the wage growth component of the jobs data can be traded as an inflation indicator, it's been filling that role less and less as markets haven't seen that data flow through to inflation metrics.

Perhaps the most interesting order of business this week is the technical landscape itself.  Bond markets have been exceptionally flat since last Tuesday's big day of volume/volatility, and all subsequent trading has occurred inside that range.  These patterns typically precede a bigger breakout and the start of a new phase of momentum.

2017-7-31 Open


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 3.5
102-29 : -0-01
Treasuries
10 YR
2.2995 : +0.0125
Pricing as of 7/31/17 9:07AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Monday, Jul 31
9:45 Chicago PMI * Jul 60.0 65.7
10:00 Pending sales change mm (%)* Jun 0.7 -0.8
10:00 Pending homes index * Jun 108.5
Tuesday, Aug 01
8:30 Personal consump real mm (%)* Jun 0.1
8:30 Consumption, adjusted mm (%)* Jun 0.1 0.1
8:30 Core PCE price index yy (%) Jun 1.4
8:30 PCE price index mm (%)* Jun -0.1
8:30 Core PCE price index mm (%)* Jun 0.1 0.1
10:00 ISM Manufacturing PMI * Jul 56.5 57.8
10:00 ISM Mfg Prices Paid * Jul 55.5 55.0
10:00 Construction spending (%)* Jun 0.4 0.0
Wednesday, Aug 02
7:00 Mortgage Market Index w/e 418.5
8:15 ADP National Employment (k)* Jul 185 158
9:45 ISM-New York index * Jul 739.1
Thursday, Aug 03
8:30 Initial Jobless Claims (k) w/e 242 244
10:00 ISM N-Mfg Bus Act * Jul 59.6 60.8
10:00 ISM N-Mfg PMI * Jul 57.0 57.4
Friday, Aug 04
8:30 Non-farm payrolls (k)* Jul 183 222
8:30 Unemployment rate mm (%)* Jul 4.3 4.4