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International tensions take center stage in a light-data week

International tensions take center stage in a light-data week (Part 1 of 7)

International tensions take center stage in a light-data week

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 rally on international tensions

Last week, the tensions in Ukraine took center stage as investors participated in the “risk-off” trade. This means they sold riskier assets (like stocks and high yield bonds) and bought low-risk assets like Treasuries. Stocks had a difficult week, with the S&P 500 selling off 37 points to finish the week at 1,841.

Generally, the week after the jobs report tends to be somewhat data-light. Last week was no exception, as there was not much market-moving data aside from retail sales (which ticked up despite bad weather). That said, the January numbers were revised downward. Import prices and the Producer Price Index showed that inflation remains under control. Finally, the University of Michigan consumer confidence number fell, although not by much. Many economists believe Q1 will be somewhat weak, with an acceleration into the second half of the year.

After starting the week at 2.79%, bonds rallied to finish the week at 2.65%.

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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