Another day, another example of bonds ignoring the potentially negative cues while continuing to react from the positive ones. Correlation may not be causality, but stock losses have appeared to help facilitate bond buying on multiple occasions since last Friday. Today brought another example with stocks start to falter around 12:30ET following headlines regarding a 25% tariff rate on European imports. Even as stocks have moved off the lows heading into after hours trading, bond yields didn't follow. That leaves us at another "best since early December" level in both Treasuries and MBS.
Slow, sideways morning so far. MBS unchanged and 10yr up 0.2bps at 4.3
12:43 PM
Best levels of the day with MBS up 1 tick (.03) and 10yr down 2.3bps at 4.274
03:28 PM
New best levels. MBS up 5 ticks (.16) and 10yr down 5.1bps at 4.246
Lock / Float Considerations
In the midst of what has been an impressively calm/large bond market rally, there are few ways to approach lock/float decisions. First off, although technicals cannot predict the future, Tuesday's addition to the bond market gains brings trading levels closer to the point that some traders will assume technical resistance. This is a short term motivation (because the data will have a bigger impact in the medium term), but it could be worth something to those who are worried about locking only to see rates continue to fall. In general, however, rally days only tend to buy more room to maneuver for the risk-tolerant clients. Risk-averse clients would always be locking the lowest rates in more than a few months anyway.
