Short Week Marks Transition Into Riskier Territory

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For the bond market, September and/or October often see bigger moves than the preceding summertime months.  There are notable exceptions, to be sure, but in general, the Fall tends to do a few things in a particular order of prevalence.

More Prevalent:

1. Push yields back in the other direction if they’ve been moving one direction for most of the year

2. Push yields quickly higher or lower if they’ve been consolidating for more than a few months

Less Prevalent:

1. Add emphasis to an existing rally or sell-off

2. Continue a consolidation for several more months.

2018 is definitely a year that sets up the Fall months with an existing consolidation.  That can be seen in the converging yellow lines in the following chart.  The chart also shows slow stochastics at the bottom–a momentum indicator.  When the lines hit, or come close to the floor of that range, bonds are considered ‘overbought.’  That implies a bounce toward higher rates more often than not.  

In other words, we’re beginning Fall trading–a time when movement is more likely to increase–with a negative implication for that movement!  Not too exciting if you like low rates.  The caveat is that all of the above is based purely on technical analysis.  Fundamentals matter too.  If the data starts painting a different picture, that could easily overshadow the technical implications above.

To that end, this week is active in terms of data with both the ISM reports (manufacturing and non-manufacturing), ADP Employment (on Thu, not Wed) as well as NFP on Friday.  There are other reports on tap, but those are the biggest potential market movers.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


FNMA 4.0

101-23 : -0-04


10 YR

2.8913 : +0.0383

Pricing as of 9/4/18 9:23AMEST

Tomorrow’s Economic Calendar

Time Event Period Forecast Prior
Tuesday, Sep 04
10:00 ISM Mfg Prices Paid * Aug 71.1 73.2
10:00 ISM Manufacturing PMI * Aug 57.7 58.1
10:00 Construction spending (%)* Jul 0.5 -1.1
Wednesday, Sep 05
7:00 Mortgage Market Index w/e 344.0
7:00 MBA Purchase Index w/e 230.1
7:00 Mortgage Refinance Index w/e 952.9
8:30 International trade mm $ (bl) Jul -50.2 -46.3
9:45 ISM-New York index * Aug 797.5
Thursday, Sep 06
8:15 ADP National Employment (k)* Aug 190 219
8:30 Productivity Revised (%) Q2 3.0 2.9
8:30 Labor Costs Revised (%) Q2 -0.9 -0.9
8:30 Jobless Claims (k) w/e 215 213
10:00 Factory ex-transp mm (% )* Jul 0.4
10:00 ISM N-Mfg Bus Act * Aug 56.9 56.5
10:00 ISM N-Mfg PMI * Aug 56.8 55.7
Friday, Sep 07
8:30 Average earnings mm (%) Aug 0.2 0.3
8:30 Private Payrolls (k)* Aug 190 170
8:30 Non-farm payrolls (k)* Aug 190 157
8:30 Unemployment rate mm (%)* Aug 3.8 3.9

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