Bonds Feeling Defensive Despite Trump's Demands For Lower Rates
Thu, Jan 23 2025, 4:42 PM
MBS Recap
Bonds Feeling Defensive Despite Trump's Demands For Lower Rates
MBS Recap Matthew Graham | 4:40 PM
Bonds Feeling Defensive Despite Trump's Demands For Lower Rates
Bonds lost ground this morning despite slightly higher Jobless Claims. There are no obvious cases for causality apart from markets generally bracing for the impact of impending fiscal changes. Some feel that tariffs will increase inflation. Others feel that separate policies will increase growth (or decrease revenue). None of the above is good for rates. Notably, Trump said he would "demand" lower interest rates in his Davos speech today and 2yr Treasury yields actually dropped enough to notice, but not by enough to suggest the market is reading much into it.
Slightly weaker overnight and no major change after data. MBS down an eighth and 10yr up 2.3bps at 4.634
01:52 PM
Additional weakness into 11am hour but sideways since then. MBS down 5 ticks (.16) and 10yr up 3.7bps at 4.469
04:08 PM
Still sideways after AM weakness. MBS down 6 ticks (.19) and 10yr up 3.3bps at 4.645
Lock / Float Considerations
As feared (or perhaps just a coincidence?), bonds weren't interested in extending last week's rally without any compelling motivation from economic data. This has been and will continue to be a limiting factor for any hope of a meaningful rate rally. There are no scheduled market movers on the horizon until the Jan 29th Fed Announcement (and more importantly, press conference).
