Must-know: Why bonds sold off slightly on stronger economic data

Market Realist

Realist Real Estate Roundup, December 9–13 (Part 1 of 7)

Why follow the weekly Realist 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 homebuilders.

Bonds sell off slightly on stronger economic data

The ten-year bond yield increased by 1 basis point, from 2.85% to 2.86%, as retail sales came in better than expected. The consensus now seems to be around a 50-50 chance of a Fed taper at the FOMC meeting next week.

Initial reports on Black Friday look disappointing, but Cyber Monday was better

Despite the strong November retail sales report, The initial indications regarding the holiday shopping season aren’t looking great. Black Friday was very poor—the first actual decline in seven years. Retailers have been promotional from the very beginning. Early Cyber Monday reports look better. Certainly a lackluster holiday shopping season bodes ill for any sort of acceleration into the beginning of 2014. The Fed is anticipating a big increase in growth in 2014, but investors should recognize that the Fed’s forecasts for GDP growth have been consistently high.

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.

Continue to Part 2

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