Stronger Bonds, Before and After (And Regardless of) Economic Data
Wed, Nov 27 2024, 3:17 PM
MBS Recap
Stronger Bonds, Before and After (And Regardless of) Economic Data
MBS Recap Matthew Graham | 3:16 PM
Stronger Bonds, Before and After (And Regardless of) Economic Data
Bonds were stronger overnight with 10yr yields hitting roughly 4.25% even before this morning's economic data came out. Now at the 3pm CME close, 10yr yields are still at 4.25% and they didn't stray too far from that midpoint in either direction. Data was neither friendly nor unfriendly and there was certainly no discernible reaction. We're left to chalk up the rally to serendipitous, temporary factors such as month-end trading, holiday weekend position squaring, and the proverbial skids being greased by a light liquidity environment. It was and always will be the plan to basically ignore market movement on Thanksgiving week and tune back in more attentively during jobs report week (i.e. next week). NOTE: we are not currently planning on scheduled commentary for this Friday's half day unless something momentous happens. Bonds will be open until 2pm ET.
moderately stronger overnight and no reaction to 8:30AM data. MBS up 6 ticks (.19) and 10yr down 5.2bps at 4.253
10:14 AM
Modest weakness after PCE data. MBS still up 5 ticks (.16) and 10yr down 3.8bps at 4.268 but up from lows of 4.24
02:31 PM
Near the best levels now. MBS up a quarter point and 10yr down 6.6bps at 4.24
Lock / Float Considerations
The rising rate trend that began in October finally ended last week. Bond's victory had been to merely move sideways instead of higher in yield. Bessent's Treasury appointment added emphasis to the reversal, giving the appearance that rates are headed back in the other direction. While such a move is possible, it is most likely to be seen in response to sufficiently weak economic data. In other words, the early rally this week is "nice," but it's only an indication of ongoing improvement if the data says so.
