Moody's Pulls Pin And Walks Away With 10 Minutes Left to Trade
Fri, May 16 2025, 5:26 PM
MBS Recap
Moody's Pulls Pin And Walks Away With 10 Minutes Left to Trade
MBS Recap Matthew Graham | 5:25 PM
Moody's Pulls Pin And Walks Away With 10 Minutes Left to Trade
Bonds began the day stronger after a gentle overnight rally. Selling commenced at 9:30am for the 4th day in a row and picked up slightly after the highest reading on inflation expectations since 1981. Even then, losses were modest at best and bonds were generally flat/unchanged until the very end of the day. With carefully considered timing, Moody's pulled the pin and walked away with 10 minutes left to trade. The grenade in this case was a downgrade of the US credit rating. This move is certainly in the ratings agencies' playbooks amid congressional budget battles, but most notably all the way back in 2011. Also of note, Moody's was the last of the big 3 to have the US at a triple A rating, so while it's not the craziest thing that ever happened to bonds, the timing made for some last minute selling ahead of the 5pm cut-off.
modestly stronger overnight and slowly eroding so far. MBS up 2 ticks (.06) and 10yr down 2.8bps at 4.403
02:06 PM
Sideways at weakest levels. MBS down 1 tick (.03) and 10yr up about half a bp at 4.437
05:03 PM
additional weakness after Moody's downgrade. MBS down a quarter point on the day and 10yr up roughly 5bps at 4.479
Lock / Float Considerations
Bonds/rates find themselves in the unpleasant position of not knowing where their next big impetus for improvement will come from. While it's true that rates can fall despite an obvious catalyst, this is nonetheless not a float-friendly environment. The only foreseeable exceptions would be for seriously weak economic data and another big dip in stocks.
