Today's most prominent feature was a large, rapid move in Fed Funds Futures and other short-term rate metrics. Longer term rates benefited as well, but short term rates clearly led the rally. The issue is that there was no obvious catalyst. Some reports suggested "regional bank fears," but it's hard to document that with the timing of market movement. Other considerations may include comments from Fed's Waller, but those were over 2 hours before the bond rally. To be sure, regional banks had a terrible day, but there too, the biggest volume and volatility transpired about 2 hours before the move in Fed Funds Futures. Whatever the truest, most nitty-gritty catalyst, we'll take it!
Slightly stronger overnight and limited reaction to Philly Fed. MBS up 1 tick (.03) and 10yr down 1.3bps at 4.016
09:11 AM
Quick reversal after 10s hit 4.0%. Now up half a bp to 4.034. MBS down a quick 3 ticks (.09) and just over an eighth from AM highs.
11:43 AM
Bouncing back a bit now. MBS unchanged and 10yr down nearly 1bp at 4.019
01:12 PM
Big mystery rally from 12:15 to 12:45. 10yr down 3.8bps at 3.991. MBS up and eighth.
03:53 PM
Near best levels. MBS up 6 ticks (.19) and 10yr down 5.6bps at 3.973
Lock / Float Considerations
As rates continue flirting with longer-term lows, risk-averse clients remain in lock mode. Meanwhile, risk-tolerant clients continue to enjoy the absence of any major corrections as they wait for more negative volatility to force their hand. The trend is your friend until it's not.
