While the average day of the past few weeks has involved election odds pushing yields higher, today was quite the opposite. There's some debate as to whether it was polling or betting market odds that got the markets attention, but less debate about the nature of the ifs and thens at a broad level. A modicum of lower certainty of a Trump victory was the catalyst. It was a spark that didn't need to burn for long in this environment characterized by excessive dry powder for volatility. Bonds thought better of the overnight rally by mid-day, but not enough to undo the gains. Ultimately, yields ended right about where they were before Friday's jobs report. Exciting stuff for today, but boring in the bigger picture.
Much stronger overnight on shifting election odds. MBS up 3/8ths and 10yr down 11.3bps at 4.281.
11:21 AM
Losing ground since 10am. Still much stronger on the day with MBS up a quarter point and 10yr down 9.3bps at 4.301
01:33 PM
New lows, still up 5 ticks (.16) on the day, but down a quarter point from highs. 10yr down 7.2bps at 4.322, but up from lows of 4.262
04:08 PM
Off the lows from the last update. MBS up 9 ticks (.28) and 10yr down 9.7bps at 4.297.
Lock / Float Considerations
The market's unwillingness to maintain any gains following the jobs report is the latest piece of evidence that a meaningful rate rally isn't possible until after the election. Whether or not someone should hold out for that depends entirely on the election outcome. Some talking heads suggest bonds rally either way because they've simply moved to the sidelines, but we'd approach it from this standpoint of more selling being possible depending on the election outcome (including congressional elections).
