Don't look now, but rates just inched their way down to the best levels since the first week of May. It's probably NOT fair to credit geopolitical developments for the bond market improvement. While those developments arguably had an impact at times during the day, they were also arguably a zero sum game by the end of the day (due to a rapid de-escalation of armed conflict). What's left over is the improvement seen earlier in the day due to the shift in Fed Funds Rate expectations after comments from Bowman. This no doubt increases the market's anticipation for Fed Chair Powell's congressional testimony over the next two days.
Modestly stronger overnight with additional gains after Bowman comments on supporting a July rate cut. MBS up 6 ticks (.19) and 10yr down 6.3bps at 4.315
12:38 PM
Slow, steady bond gains over the past 2 hours. 10yr down 8.3bps to 4.296 and MBS up 9 ticks (.28).
02:43 PM
Off the strongest levels but still stronger on the day. MBS up 7 ticks (.22) and 10yr down 5.8bps at 4.321
03:40 PM
Technically down an eighth from the highs. MBS still up 6 ticks (.19) and 10yr still down 4.6bps at 4.333
Lock / Float Considerations
Monday showed that the market is surprisingly receptive to Fed comments on the rate outlook depending on who's doing the commenting. This creates more volatility risk heading into Powell's testimony. If the Fed Chair happens to validate or oppose recent comments from Waller/Bowman in a forceful way (admittedly, not his style when it comes to such matters), markets are now suggesting they'd be receptive, for better or worse.
