Last week provided a much-needed recovery that counteracted some of the fast-paced selling seen in the first week of November.  Despite the friendly direction of the move, the pace and fervor left something to be desired--at least for those hoping to see clear confirmation that traders were thrilled to buy bonds when 10yr yields approached 2%.  To be fair though, one could argue that traders were at least somewhat enthusiastic about that, even if they weren't downright thrilled. 

The combination of solid support and the absence of fervor reinforces a range-bound theme heading into the end of the year.  Major updates on the trade deal can provide plenty of volatility inside a range while actual progress could certainly prompt a breakout from the trend.  Gauging the opposite of progress is a bit trickier because we have to assume both sides are employing a bit of negotiation strategy when we get downbeat trade headlines (akin to the car buyer walking out of the dealership hoping to get a call later with a lower price).

For now, the previous consolidation trend has simply shifted from sideways to "ascending" (i.e. the yellow lines are both upwardly sloped as opposed to the upper line being sloped toward lower yields).  The trend also now extends through 2019 instead of through November.  That said, don't expect it to last in perfect fashion.  We'll likely see a breakout before then.

20191118 open

The potentially friendly shift in longer-term momentum coupled with a seemingly solid bounce at the 1.90-1.94 technical zone offers some hope that the breakout will be on the friendly side, but keep in mind, we're only ever one or two trade headlines away from being pushed quickly toward the other side of the field.  (Indeed, the week began with just such a headline, covered in THIS UPDATE on MBS Live).

In terms of economic data, things don't get serious until the end of the week with Philly Fed on Thursday and Markit PMIs on Friday.


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 3.0
101-17 : +0-07
Treasuries
10 YR
1.7980 : -0.0360
Pricing as of 11/18/19 10:35AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Monday, Nov 18
10:00 NAHB housing market indx Nov 71 71
Tuesday, Nov 19
8:30 Build permits: change mm (%)* Oct -2.4
8:30 House starts mm: change (%) Oct -9.4
8:30 Housing starts number mm (ml)* Oct 1.320 1.256
8:30 Building permits: number (ml)* Oct 1.385 1.391
Wednesday, Nov 20
7:00 MBA Purchase Index w/e 253.4
7:00 Mortgage Refinance Index w/e 2374.6
Thursday, Nov 21
8:30 Philly Fed Business Index * Nov 7.0 5.6
8:30 Jobless Claims (k) w/e 219 225
10:00 Existing home sales (ml)* Oct 5.47 5.38
10:00 Exist. home sales % chg (%)* Oct 1.4 -2.2
10:00 Leading index chg mm (%) Oct -0.1 -0.1
Friday, Nov 22
9:45 PMI-Composite (source:Markit) * Nov 50.9
9:45 PMI-Services (Markit) * Nov 51.0 50.6
9:45 PMI-Manufacturing (Markit) * Nov 51.5 51.3
10:00 Consumer Inflation Expectations (1yr) (%) Nov 2.5
10:00 Consumer Inflation Expectations (5yr) (%) Nov 2.4
10:00 Consumer Sentiment (ip) Nov 95.7 95.7