Bonds were marginally weaker on Monday with no obvious scapegoats in sight. Some reporters pointed toward Fed Chair Powell's criminal inquiry as rattling the market, but bonds were effectively unchanged in the 1pm hour after a well-received 10yr Treasury auction. More importantly, there was no clear correlation between the overnight news and the overnight market movement. Volume was the lowest in several days--typical for a data-free Monday. MBS underperformed, but only because they're still range-finding after last week's massive outperformance. Tomorrow morning's trading deserves much more focus than anything seen today. CPI will be out at 8:30am ET and it is expected to be a more tradeable installment of the data compared to the last release (which proved to be questionable due to data collection constraints surrounding the shutdown/reopening timeline).
Moderately weaker overnight but holding inside the range. 10yr up 1.9bps at 4.19. MBS down an eighth of a point.
11:56 AM
No reaction to 3yr Treasury auction. 10yr up less than 1bp at 4.18 and MBS down just over an eighth of a point.
02:49 PM
MBS down 9 ticks (.28) and 10yr up 1.5bps at 4.186
Lock / Float Considerations
Mortgage rates did a good job holding relatively steady over the weekend. Price volatility in MBS continues to settle relative to Treasuries and we should soon be back to a more normal level of correlation. Tuesday is all about event risk surrounding the CPI release. As always, volatility risk is a two way street depending on the outcome of the data. Either way, this installment stands a better chance of impacting rates compared to the last one.
