Bonds began the day in slightly weaker territory, but not for any particular reason (and certainly for no interesting reasons). For those who care about such things, the yield curve continued to steepen (shorter term yields outperforming longer term yields), but this is fairly irrelevant to the mortgage world as MBS are relatively neutral in curve trading terms (durations are short enough not to get hurt when 30yr bonds are hurting, and long enough to avoid getting hurt when 2yr yields are hurting). Speaking of the neutral part of the curve, today's 5yr auction ended up fairly strong and the reaction helped yields hit their best levels of the day in the afternoon. That said, all of the above is playing out on a micro scale in the bigger picture. We're basically just drifting from one jobs report to the next.
fairly flat overnight with some selling at 8:20am CME open. MBS down 2 ticks (.06) and 10yr up 1.7bps at 4.281
01:05 PM
No major reaction to ho-hum 5yr auction. MBS up 1 tick (.03) and 10yr down 1.5bps at 4.251
03:07 PM
holding near best levels with MBS up 2 ticks (.06) and 10yr down 2.5bps at 4.239
Lock / Float Considerations
With rates hitting 10-month lows twice this week, risk-averse clients are still in lock mode. Risk-tolerant clients have enjoyed a very narrow rate range in August, but they should be aware that odds are we'll be waiting until the early September jobs report before seeing any major rate momentum, for better or worse.
