Last Week

- Bond markets much weaker after FOMC Minutes (more...)

- Yellen nomination approved in Senate Committee, full vote in December

- Filibuster change and Implications for Mel Watt taking over at the FHFA (more...)

- Bond market weakness turned corner after Thursday's Philly Fed data

This Week

- Mostly Housing Data (including Pending Sales, Permits, and Case Shiller)

- A few moderately important pieces of economic data

- Treasury Auction Cycle (less relevant 2, 5, 7 rotation)

- Markets closed Thursday for Thanksgiving and open half day on Friday

- Pending Home Sales on shaky ground

Strategy

We enter this holiday-shortened week with bond markets having done an admirable job of consolidating and correcting after the losses inspired by last Wednesday's FOMC Minutes.  While markets were somewhat stirred by the Fed's apparent resolve with respect to dialing down asset purchases, it's the following Friday's Employment Situation Report that will inform that more than anything.  Whatever the case, last week "empowered" next Friday, such that an exceptionally strong reading may result in December tapering--something that didn't look possible no matter how strong the jobs data.

Between now and then, we have this week's Thanksgiving Holiday taking a good amount of focus off bond markets.  Thursday is a full closure and Friday is a half day.  Post-Thanksgiving Fridays tend to be unofficial holidays as well.  This one, however, is the last day of the month--a somewhat important distinction when it comes to financial markets as money managers must have bought or sold a certain mix of securities in order to align their portfolios with various popular benchmarks.  Rather than make Friday less of an unofficial holiday, this is more likely to make Wednesday morning busier than it might otherwise be.

Between now and then, we have a few moderately important pieces of economic data to digest, as well as the less consequential (to MBS) set of Treasury Auctions (2,5, and 7yr maturities as opposed to the more important 3/10/30 rotations).  Monday's data focal point will be Pending Home Sales.  This isn't traditionally a big market mover, but it's doing things it hasn't done for quite some time--both of which are noted in the charts below--and thus may have a little extra oomph if it falls very far from the consensus for a 1.3% increase.

In the rest of the week, Housing Starts and Consumer Confidence anchor Tuesday morning.  Durable Goods and Jobless Claims arrive on Wednesday.  Seasonality makes Jobless Claims somewhat easier to overlook this week, not to mention markets will get the official word on labor markets next Friday anyway.

Charts

Pending Home Sales Considerations

The forecast is currently calling for a modest improvement of 1.3%.  If the data continues to slide, it could be viewed as quite a negative early indicator for other housing metrics due to it's foray into territory not seen in years (in terms of the month-over-month and year-over-year change considerations pointed out on the chart below).

Pending Home Sales relationship to other housing metrics (Building Permits also report this week as part of the Housing Starts data).