There's no quicker way to classify the movement we've seen over the past 2 weeks. The market is actively protesting the war in Iran--not because it's a sentient being that cares about violence, but rather because the implications for inflation, economic uncertainty, and Treasury issuance on not great. There weren't even any major developments today--just a few newswires that suggested no end in sight for the conflict or the closure of the Strait of Hormuz. 10yr yields are quickly back up to early Feb levels, but the selling is being led by the short end of the curve with 2yr yields at the highest levels in more than 6 months.
Roughly unchanged overnight. No reaction to econ data. MBS up 1 tick (.03) and 10yr down half a bp at 4.223
11:33 AM
Weakest levels. MBS down a quarter point. 10yr up 2.7bps at 4.254.
02:03 PM
Back to weakest levels after a very modest attempt to recover. MBS down a quarter point again and 10yr up 2.6bps at 4.253
03:29 PM
More selling around the 3pm close. MBS down 3/8ths and 10yr up 4.3bps at 4.27
Lock / Float Considerations
Volatility risk remains much higher than normal due to geopolitical uncertainty. The entire month of March has been bearish for rates so far. It makes sense to remain defensive until that bearish streak has clearly leveled off.
