Bonds Unexpectedly Forced to Focus on War Instead of Data
Tue, Oct 1 2024, 4:26 PM
MBS Recap
Bonds Unexpectedly Forced to Focus on War Instead of Data
MBS Recap Matthew Graham | 4:24 PM
Bonds Unexpectedly Forced to Focus on War Instead of Data
Just 30 minutes before the month's most important week of economic data was about to hit its stride, headlines hit the newswires regarding an imminent missile attack on Israel. While various iterations of such headlines are unfortunately common, these examples got the market's attention, resulting in a quick "flight to safety" trade (stock prices and bond yields moved lower). When the AM econ data came out 30 minutes later, the impact on bonds was insignificant by comparison. The initial flight to safety was unwound in the afternoon, but bonds remained in moderately stronger territory on the day.
Flight to safety rally after Israel/Iran headlines and then flat after data. MBS up 5 ticks (.16) and 10yr down 7.9bps at 3.704
01:03 PM
strongest levels for MBS with 5.0 up a quarter point. 10yr down 7.2bps at 3.711
02:03 PM
weakest levels now with MBS still up 2 ticks (.06) and 10yr down 4.4bps at 3.739
03:46 PM
Off the weakest levels now. MBS up an eighth and 10yr down 4.3bps at 3.74.
Lock / Float Considerations
The post-Fed correction is officially over and bonds are now at the whim of economic data (and perhaps unexpected geopolitical headlines). Risk averse clients are waiting for better evidence of new rally momentum. Risk tolerant clients are rolling the dice on weak econ data. Results could push rates in either direction, but the biggest movement is reserved for the jobs report on Friday.