Rates rallied hard into last September 2024's Fed rate cut and then bounced relentlessly higher. With average rates up about a quarter point since Tuesday, the parallels are certainly there. But Last year's spike didn't happen so abruptly on Fed day and the day after. It required upbeat econ data to send rates screaming higher. In today's case, we had two separate upbeat reports. This was barely worth an eighth of a point of weakness in MBS and not even 3bps of weakness in 10yr yields, but on average, lenders are feeling defensive (when MBS prices were at the same levels 2 weeks ago, rates were almost 10bps lower). The good news is this: the deja vu is both coincidental and driven by objective developments. It's not on a pre-set course and it won't continue if incoming economic data is weak. The bad news is that if the incoming data is surprisingly strong, well... you know.
Slightly weaker after data. MBS still up 1 tick (.03) and 10yr up 0.1bps at 4.081
09:39 AM
Losses continue. MBS down 6 ticks and 10yr up 4.9bps at 4.129
12:27 PM
sideways after early losses. MBS down 3 ticks (.09) and 10yr up 3bps at 4.111
03:17 PM
MBS down just over an eighth and 10yr up 3.4bps at 4.115
Lock / Float Considerations
Most clients are lock-biased until the post-Fed selling momentum meets clear resistance. The most risk-tolerant clients will have noted that bonds started Thursday in stronger territory and only sold-off after econ data. This speaks to the possibility that further selling isn't necessarily a given without further justification.
