MBS Day Ahead: Thanksgiving Week Trading Themes Trying to Show Up Early

Posted To: MBS Commentary

Daily and overnight trading volumes have been declining, and intraday trading ranges have been getting more narrow. The starting point for that trend was the day after November 7th (when all the news hit about tariff roll-backs seemingly being in the bag for the US/China trade deal). By the beginning of the following week (last week), we had the White House saying no rollback had been agreed to. At the same time, bonds were working through the 2nd biggest week of corporate bond issuance of the year and breathing a sigh of relief as Powell did no harm during his congressional testimony. A mid-week Trump speech also lacked any of the trade deal optimism that has been a constant enemy of low rates. In short, there was a big blow-up for yields 2 weeks ago and then multiple reasons to recover last…(read more)

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MBS Day Ahead: Thanksgiving Week Trading Themes Trying to Show Up Early
MBS Day Ahead: Thanksgiving Week Trading Themes Trying to Show Up Early

MBS RECAP: Small Victory as Broader Battle Continues

Posted To: MBS Commentary

As 2019 winds down, investors have never been so broadly certain about the overall market thesis. Unfortunately, that thesis calls for unavoidable uncertainty and the inability to clear it up very quickly. Reason being: we need to see if global economic data is going to reverse course and make improvements. We also need to see how the US/China trade negotiations will evolve. Trade is so important because investors are viewing it as one of the most time advance indicators imaginable. In other words, if a trade deal happens, it may not be fully reflected in the economic data for several months. Trickle down effects could take years. Granted, a deal will probably happen, but the details and the timeline remain intentionally mysterious. That's one of the key reasons markets seem to put too…(read more)

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MBS RECAP: Small Victory as Broader Battle Continues
MBS RECAP: Small Victory as Broader Battle Continues

Lowest Mortgage Rates in 2 Weeks

Posted To: Mortgage Rate Watch

Mortgage rates added to last week’s improvement with another modest drop today. That brings the average lender to the best levels in exactly 2 weeks–a welcome change after hitting the highest levels in more than 3 months on Friday November 8th. US/China trade relations have been a key source of volatility , but markets are also eager to see how economic data unfolds as 2019 draws to a close. The combination of a phase 1 US/China trade deal and reasonably resilient economic data could push rates much higher and confirm a rising rate trend for the next several months. Conversely, if the trade deal looks shaky and if economic data deteriorates, rates could take another run at the long-term lows seen in early September. This isn’t a narrative that will play out today, tomorrow, or even any time…(read more)

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Lowest Mortgage Rates in 2 Weeks
Lowest Mortgage Rates in 2 Weeks

MBS Week Ahead: Trade Headlines and Technicals (With a Side of Data)

Posted To: MBS Commentary

Last week provided a much-needed recovery that counteracted some of the fast-paced selling seen in the first week of November. Despite the friendly direction of the move, the pace and fervor left something to be desired –at least for those hoping to see clear confirmation that traders were thrilled to buy bonds when 10yr yields approached 2%. To be fair though, one could argue that traders were at least somewhat enthusiastic about that, even if they weren't downright thrilled. The combination of solid support and the absence of fervor reinforces a range-bound theme heading into the end of the year. Major updates on the trade deal can provide plenty of volatility inside a range while actual progress could certainly prompt a breakout from the trend. Gauging the opposite of progress is a…(read more)

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MBS Week Ahead: Trade Headlines and Technicals (With a Side of Data)
MBS Week Ahead: Trade Headlines and Technicals (With a Side of Data)

MBS RECAP: Bonds Level Off Without Committing to Reentry

Posted To: MBS Commentary

Yields broke up and out of their prevailing range last week and took the present week to focus on reentry. While those efforts went a long way toward defusing concern over how quickly rates were moving higher, they fell short of offering much reassurance about where they're going next. In other words, rates did only as much as they had to do in order to unwind last week's more abrupt spikes. They made no promises for anything more. Today, specifically, was the least eventful day of the week despite boasting the biggest economic report. It didn't help that Retail Sales came in very close to consensus and with fairly well mixed internal components. Next week has a more robust line-up of econ data, but it doesn't get interesting until the end. Beyond that, trade-related headlines…(read more)

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MBS RECAP: Bonds Level Off Without Committing to Reentry
MBS RECAP: Bonds Level Off Without Committing to Reentry

Much Better Week For Rates, But Bigger Picture Risks Remain

Posted To: Mortgage Rate Watch

Mortgage rates finished the week in much better territory compared to last Friday. Today only added modestly to that move, but the simple act of moving in a friendly direction feels like a major victory after coming toe to toe with the highest rates in more than 3 months (last week). There weren’t any obvious reasons for today’s meager gains. In fact, the underlying bond market was slightly weaker on the day (which usually implies higher rates). But lenders were still getting caught up with the week’s previous bond market gains and thus managed to overlook the contrary cues from the market. In the slightly bigger picture, this week can be seen as the bond market’s way of saying it’s not quite ready yet to embark on a panicked race back toward higher rates . The question remains: is that sort…(read more)

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Much Better Week For Rates, But Bigger Picture Risks Remain
Much Better Week For Rates, But Bigger Picture Risks Remain

MBS Day Ahead: Retail Sales in Focus; Trade Headlines Always a Risk

Posted To: MBS Commentary

It's Friday and that means it's time to be on the lookout for unexpected trade-related headlines, especially in the afternoon. Those sorts of newswires and tweets have become almost predictable at the end of any given week, but markets have increasingly taken them with a grain of salt. Case in point, last week's major motivation for stock gains and bond market weakness was the notion that previously announced tariffs would be rolled back as a part of the phase 1 trade deal. The biggest move followed an announcement to that effect from China's commerce minister. But when Trump pushed back on those headlines on Friday, it did little to undo what had already been done (though it definitely moved markets). Before we get to the point in the day where such headlines become a bigger…(read more)

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MBS Day Ahead: Retail Sales in Focus; Trade Headlines Always a Risk
MBS Day Ahead: Retail Sales in Focus; Trade Headlines Always a Risk

MBS RECAP: Bonds Make Case For a Comeback

Posted To: MBS Commentary

By the end of last week, although there was potentially a sliver of hope afforded by Friday's highs being slightly lower than Thursday's, it looked like bonds were punching out of the massive 2019 rally and embarking on the new trend toward higher rates. But the new week of trading has increasingly called that conclusion into question. Granted, there were a few other reasons to hold out hope over the weekend (trade deal backtracking, temporary trepidation about new bond issuance, the technical ceiling at 1.94% potentially acting as a buying cue, and the chance that the weakness was exacerbated by the "3-day weekend effect"), but no one could be blamed for not wanting to catch that falling knife. By moving back down to 1.82%, 10yr yields have already made it clear that a surge…(read more)

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MBS RECAP: Bonds Make Case For a Comeback
MBS RECAP: Bonds Make Case For a Comeback

Mortgage Rates Are Actually LOWER This Week

Posted To: Mortgage Rate Watch

Mortgage rates moved lower again today. Whereas it was a bit easier to be dismissive about recent improvements, they’re starting to add up at this point. Granted, we’re not talking about anything other than a return to the rates seen on November 6th, but for anyone who was rate shopping at the end of last week, that’s a welcome change. As if often the case on Thursdays, there is a major discrepancy between much of today’s mortgage rate news and what I’m telling you here. Specifically, whereas I’m telling you rates are lower today and as low as they’ve been in more than a week, the average major media outlet is saying rates are HIGHER this week. As usual (at least when it comes to rates on Thursdays), I’m right and they’re wrong. Actually, I’m right in a timely way and they’re right if the goal…(read more)

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Mortgage Rates Are Actually LOWER This Week
Mortgage Rates Are Actually LOWER This Week

MBS Day Ahead: Should The Last Trend Get a Do-Over?

Posted To: MBS Commentary

Bonds gave us quite a scare last week as key technical ceilings gave way. High volume and concrete fundamental justification added validity to the move. Combine that with the massive size and old age of the 2019 rally and there was more than just a small reason to be concerned. To be very clear, there are still reasons to be concerned about a potential big-picture shift that may be in the works, but we can at least entertain the possibility that such a shift has yet to be confirmed. I keep going back to 2011 as the best example of similar behavior in the bond market. For several weeks now, it has been the precedent that lets us know bonds could rally even more, or undergo only a mild correction before embarking on another rally trend. If we examine 2019 vs 2011 with a long-term modified moving…(read more)

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MBS Day Ahead: Should The Last Trend Get a Do-Over?
MBS Day Ahead: Should The Last Trend Get a Do-Over?