Bonds began the day in decent shape by pushing back against weakness during European hours. MBS were briefly in just-barely-positive territory in the first hour. Things deteriorated very slowly, but very steadily after that. It took the entire trading session for MBS to give up an eighth of a point. 10yr Treasuries had it worse, with yields moving back up near yesterday morning's highs. Chalk that up to ongoing "curve steepening" (fancy talk for 10yr yields rising faster than 2yr yields, and combine that notion with the fact that the average mortgage trades more like a 5yr Treasury these days). Modest volatility aside, volume and liquidity remained "holiday low." Next week brings different risks, mainly due to the chance that some big traders will be able to reposition bond portfolios after 2024 is officially over. These could go either way. The bigger volatility risk won't show up until the delayed jobs report on Jan 10th.
Slightly weaker overnight, all during European hours. Holding ground now with 10yr up 1.6bps at 4.594 and MBS down 1 tick (.03).
11:17 AM
10yr up 1.5bps at 4.593. MBS unchanged.
02:05 PM
hovering near weakest levels. MBS down 2 ticks (.06) and 10yr up 3.5bps at 4.612
Lock / Float Considerations
Rates continue muddling along at or near longer-term highs following the December 18th Fed announcement. There haven't been any glorious recoveries since then. If we hope to see one, it would depend on big ticket econ data like the jobs report or CPI (Jan 10th and 15th respectively). Random volatility remains a risk in the New Year holiday week. If we see calendar-driven support, it wouldn't be until Thursday and even then (and to reiterate), bigger victories require bigger data.
