While it would be an overstatement to say that bonds have fully outgrown the phase of volatility that's dominated October and early November, it's not unfair to say that volatility has been subsiding rather markedly--especially if we focus on day over day closing levels. 8 out of the past 8 trading sessions have seen 10yr yields end the day in a 4.40 to 4.46 range--pretty narrow, even for a more boring economic and political backdrop. Today's neutrality had at least something to do with the mixed messages in the econ data, but bonds are definitely waiting for the heavy hitting report of early December before making bigger bets.
Modestly stronger overnight and holding gains after data. MBS up 3 ticks (.09) and 10yr down 2.2bps at 4.383
11:04 AM
Off best levels now. MBS up only 1 tick (.03) and 10yr now up 0.4bps at 4.409
03:27 PM
MBS down 1 tick (.03) and 10yr up 2.4bps at 4.429
Lock / Float Considerations
The burden of proof remains on economic data to make a case for any significant improvement in rates. In other words, don't expect big, sustained improvement without markedly weaker data/inflation. This doesn't mean rates can't drop here and there, but it does mean there's not currently a reason for them to drop very much or for very long unless data makes a case for it. The best hope over the last 2 weeks of November is for volatility to subside and for the prevailing uptrend in rates to run out of steam. These are not the sort of hopes upon which to base lock/float strategy, but it does generally seem like this is what's been happening.
