Must-know releases driving bonds, homebuilders, and REITs

Must-know releases driving bonds, homebuilders, and REITs (Part 1 of 6)

Why bonds rallied on the March FOMC meeting

Why follow this weekly real estate roundup?

The roundup is a weekly series in which we discuss the week’s trading in government bonds and TBA (To-Be-Announced) mortgage-backed securities. We’ll see where mortgage rates have been and we’ll go over the weekly economic data and earnings announcements. Then we’ll look forward to what’s coming up the following week. The information in this series will be relevant to mortgage REITs like American Capital Agency (AGNC), Annaly (NLY), Hatteras (HTS), Capstead (CMO), and MFA Financial (MFA) as well as people who invest in fixed income ETFs like TLT or in homebuilders.

10 year bond yield - LTEnlarge Graph

Bonds get a break, with little data to react to

Last week was a light week sandwiched between the FOMC meeting and the upcoming jobs report. Bonds barely moved, as there was little data to really push markets around. Probably the most important data point was the final revision to fourth quarter GDP which was released on Thursday. It was an upward revision from 2.4% to 2.6%. The final number was slightly below the Street expectations of 2.7%.

On Friday, we got personal spending and personal income numbers, which are important predictors of consumption. Since consumption is 70% of the U.S. economy, they’re important drivers of economic growth. Both numbers came in line with expectations, with a 0.3% month-over-month increase in both. The inflation numbers were also tame. After the report, we did see some sell-side firms taking down their Q1 GDP numbers. Q1 GDP will undoubtedly be affected by the poor weather in the Northeast and the Midwest.

After starting the week at 2.73%, bonds rallied to finish the week at 2.71%. Next week has the all-important jobs report, which will give the market something to fret over.

In the next parts of this series, we’ll look at trading in the TBA market (which is the basis for mortgage rates), see where mortgage rates have been for the week, and then discuss past and upcoming economic data.

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