MBS RECAP: Big Victory This Week (In Response To Last Week's Big Loss)

Posted To: MBS Commentary

Big Victory This Week (In Response To Last Week's Big Loss) Relative to the spectrum of possibilities, ending the week with 10yr Treasury yields under 1.1% is a big victory. Of course that wouldn't have been the case before last week, but everything's relative in the bond market. From here, we'll be watching this week's high yields very carefully for continued support. If rates are going to surge back below 1.0%, the justification for such a thing has yet to reveal itself. Next week is light on data, and bonds are closed on Monday for Martin Luther King Jr. Day. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Retail Sales -0.7 vs 0.0 f'cast, -1.4 prev Core Annual PPI 1.2 vs 1.3 f'cast, 1.4 prev NY Fed Manufacturing 3.5 vs 6.0 f'cast…(read more)

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MBS RECAP: Big Victory This Week (In Response To Last Week's Big Loss)
MBS RECAP: Big Victory This Week (In Response To Last Week's Big Loss)

The Real Story Behind The Past 2 Weeks of Mortgage Rate Volatility

Posted To: Mortgage Rate Watch

It was easy to get lulled into complacency by the second half of 2020 when it came to mortgage rates. Even as other indicators said rates should be rising, they continued on a calm journey to multiple record lows. 2021 has been very different so far! Covid and its impacts on the economy remain the driving forces behind market trends. That’s generally been great for rates, but it also means that rates should gradually rise as we battle back against covid. If the onset of the pandemic pushed rates to all-time lows, it’s only fair that progress against the pandemic would result in rates moving up from all-time lows. If you ask 10yr Treasury yields, that’s been the case for quite a while. And while the stock market has been singing a similar tune, the mortgage market has been in its own glorious…(read more)

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The Real Story Behind The Past 2 Weeks of Mortgage Rate Volatility
The Real Story Behind The Past 2 Weeks of Mortgage Rate Volatility

MBS Day Ahead: Bonds Not Threatened By Stimulus; Consolidation Continues

Posted To: MBS Commentary

After the GA senate elections, the bond market immediately knew it needed to prepare for additional stimulus, even if moderate democratic voices might serve to limit the size and scope. We hazarded a guess that this was worth 10yr yields rising 25bps, roughly and finding support around 1.17%. Bond traders have now effectively made the same guess with yields switching into rally mode almost immediately after breaking above 1.17%. If that sell-off was based on the expectation for additional near-term stimulus, then last night's Biden speech was exactly what traders had priced in. The name of the game is "consolidation" now… the bridge… the intermission between the initial push up from super low covid-inspired yields and the significantly higher levels that traders can imagine…(read more)

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MBS Day Ahead: Bonds Not Threatened By Stimulus; Consolidation Continues
MBS Day Ahead: Bonds Not Threatened By Stimulus; Consolidation Continues

MBS RECAP: Bonds Playing it Extra Safe Ahead of Biden's Stimulus Details

Posted To: MBS Commentary

Bonds Playing it Extra Safe Ahead of Biden's Stimulus Details As we discussed yesterday, the strong mid-week rally suggested a good amount of short covering was behind the move. This merely means traders who bet on rising rates were finally cashing in. It doesn't mean there are lots of new buyers interested in owning Treasuries. Today's weakness supports this narrative. Traders are indeed hesitant to buy bonds until they have more clarity about the stimulus plan that the new administration will attempt to pass. Biden is expected to offer additional details tonight after markets are closed, but the real question is whether or not the plan can get moderate democratic votes in the senate. That may be the talk of the town tomorrow. Econ Data / Events 20min of Fed 30yr UMBS Buying 10am…(read more)

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MBS RECAP: Bonds Playing it Extra Safe Ahead of Biden's Stimulus Details
MBS RECAP: Bonds Playing it Extra Safe Ahead of Biden's Stimulus Details

MBS Day Ahead: Waiting On Stimulus Details, Shrugging Off Early Reports of $2 Trillion

Posted To: MBS Commentary

A few hours after markets closed yesterday, news began coming out regarding a Biden aide mentioning tonight's stimulus proposal would be in the $2 trillion neighborhood. That's quite a bit more than the $1.3 trillion that had been making the rounds a few hours prior (the same number was thrown around more than a month ago as well). Treasuries reacted to this overnight with a whopping sell-off of 3bps. This reflects the fact that markets have largely priced in some sort of $1.3+ trillion in additional spending/relief. We won't get a chance to any additional reaction until tomorrow's trading session, as Biden won't be speaking until after 7pm ET. It's another light day in terms of economic data, with Jobless Claims already out at 965k vs 795k forecast and 784k previously…(read more)

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MBS Day Ahead: Waiting On Stimulus Details, Shrugging Off Early Reports of Trillion
MBS Day Ahead: Waiting On Stimulus Details, Shrugging Off Early Reports of Trillion

Mortgage Rates Continue Healing, But Remain Well Above Recent Lows

Posted To: Mortgage Rate Watch

Mortgage rates had another solid day today–this time without any of the early drama seen yesterday. If you’re just getting caught up, the bond market (which drives day-to-day interest rate movement) has been selling off aggressively since the Jan 5th Georgia senate election. When bonds sell-off, it means bond PRICES are getting lower and bond YIELDS (aka RATES) are getting higher. The GA election sparked the move because it gave democrats total control of the government, thus making it easier to pass legislation–especially as it concerns some sort of upgrade to the most recent round of covid-relief stimulus. Covid-relief stimulus may do great things for people in the short term and for the economy in the longer term, but it does bad things for interest rates (assuming you like low rates,…(read more)

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Mortgage Rates Continue Healing, But Remain Well Above Recent Lows
Mortgage Rates Continue Healing, But Remain Well Above Recent Lows

MBS RECAP: Important Victory For Bonds, and Another Battle Ahead

Posted To: MBS Commentary

Important Victory For Bonds, and Another Battle Ahead Rates rallied today. Despite a positive reaction to a strong 30yr bond auction, it looks like traders made their minds up to be buyers well before that. The rally greatly improves the odds that 10yr yields are finding a supportive ceiling in the 1.1-1.2% zone. The show of support is still a bit tentative to rest easy, but things certainly could have been worse over the past two days. Some traders are still waiting to see what Biden has to say about stimulus tomorrow (and more importantly, whether they think moderate democrats will be in support). Econ Data / Events 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th) Core Annual CPI 1.6 vs 1.6 f'cast, 1.6 prev Market Movement Recap 08:10 AM Fairly calm overnight session–especially…(read more)

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MBS RECAP: Important Victory For Bonds, and Another Battle Ahead
MBS RECAP: Important Victory For Bonds, and Another Battle Ahead

MBS Day Ahead: An Important Day For Bonds' Attempt to Establish a Ceiling

Posted To: MBS Commentary

With yesterday offering the first legitimate push back against the recent sell-off, today becomes one of three critically important days in establishing a ceiling for bond yields (or a floor for MBS prices). With Biden announcing stimulus details tomorrow, and Retail Sales on Friday, we wouldn't expect a bond rally to get too far ahead of itself today (if it does, that would be very telling, in a good way). The goal for bond bulls is simply to avoid slipping back into sell-off mode. Conventional wisdom suggests weakness is a bigger risk in the hours leading up to the 1pm 30yr bond auction. Trading doesn't always stick to that script, of course, but the point is this: if yields are rising between 10am and 1pm, we'd want to wait to see what happens after 1pm before concluding all…(read more)

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MBS Day Ahead: An Important Day For Bonds' Attempt to Establish a Ceiling
MBS Day Ahead: An Important Day For Bonds' Attempt to Establish a Ceiling

Mortgage Rates Find Some Support After an Ugly Start

Posted To: Mortgage Rate Watch

Mortgage rates were off to a very bad start this morning, but recovered a portion of what they lost by the end of the day. The specifics depend greatly on the lender in question. Sadly, few if any lenders are still able to offer the rates seen yesterday. To make matters worse, yesterday’s rates were already significantly higher than those seen just one week prior. But how about a big silver lining? One week prior to yesterday, the average lender was offering all-time low mortgage rates. So being “significantly higher” than that still hasn’t been enough to move the average top tier conventional 30yr fixed quote up to 3%. Before covid, 3.125% was the lowest ever 30yr fixed rate! If you’re in the purchase market, 2.75% is still common (2.875% for refis). Lenders continue to be widely stratified…(read more)

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Mortgage Rates Find Some Support After an Ugly Start
Mortgage Rates Find Some Support After an Ugly Start

MBS RECAP: Much-Anticipated Correction Finally Arrives. Now What?

Posted To: MBS Commentary

Much-Anticipated Correction Finally Arrives. Now What? This morning's alert noted a scary scenario playing out in bonds due to a confluence of big picture negative motivations (power shift in D.C., ruminations about Fed tapering, brighter covid/econ outlook as vaccines roll out, and the general need to correct the extended stay in a record low range). Just as it makes sense for bonds to push back against months of sub-1% yields in the bigger picture, it also made sense that bonds should be pushing back on the shorter term selling spree that accounted for a quick spike of more than 30 basis points in 10yr yields by this morning. As of this afternoon, we finally have the first evidence of such a push-back. It remains to be seen whether it's the start of any additional friendly momentum…(read more)

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MBS RECAP: Much-Anticipated Correction Finally Arrives. Now What?
MBS RECAP: Much-Anticipated Correction Finally Arrives. Now What?