As expected, the recent raft of hawkish Fed speakers foreshadowed (whether intentionally or coincidentally) a hawkish message in today's Fed minutes. At issue: "many" meeting participants felt that a December cut would NOT likely be justified as opposed to "several" who disagreed. This was compounded by the fact that BLS rescheduled the early December jobs report for 12/16/25--6 days after the December Fed meeting. In other words, there won't be any employment data that would help the Fed justify a cut next month. Fed Funds futures agreed with a spike in implied yields immediately following the BLS news. Longer-term bonds followed suit after the Fed Minutes.
Slightly stronger overnight, but losing ground since 9:30am NYSE open. MBS unchanged and 10yr up 1.1bps at 4.12
11:01 AM
Bouncing back from AM weakness. MBS up 1 tick and 10yr up 0.9bps at 4.118
02:13 PM
no reaction to Fed Minutes. MBS unchanged and 10yr down 0.4bps at 4.106
02:43 PM
Weakest levels of the day for MBS, down 2 ticks (.06). 10yr up 1.3bps at 4.123
04:18 PM
Heading out near weakest levels. MBS down 3 ticks (.09) and 10yr up 1.9bps at 4.128
Lock / Float Considerations
Bonds were under pressure to end the day on Wednesday. Lenders who didn't reprice for the worse will be forced to account for that weakness in Thursday AM's rate sheets (assuming bonds are unchanged day over day). That's a risky assumption considering the morning release of September jobs numbers. Risk/reward is elevated ahead of that data.
