Monday was "nice." Bonds rallied more than a little bit and held those gains in an exceptionally flat manner all day. But there are caveats. Apart from last Friday, today's yields matched the long-term highs seen on July 23rd. Or on a more timely note, the rally didn't fully erase Friday's weakness. Additionally, strength was not a given. It required a fairly substantial drop in oil prices stepping from a fresh round Iran war optimism. This as been a fickle friend to say the least, though we'll never turn down the visit. Ample past precedent is a reminder that things can change quickly with respect to geopolitics. Last but not least, while econ data had no lasting impact today, Friday's jobs report is on another level.
Stronger overnight on war-related de-escalation and lower fuel prices. MBS up 9 ticks (.28) and 10yr down 4.6bps at 4.689
12:03 PM
MBS still up 9 ticks (.28) and 10yr down 5bps at 4.686
02:37 PM
Super flat. MBS still up 9 ticks (.28) and 10yr down 4.8bps at 4.687
Lock / Float Considerations
8/3/26 - Stronger bonds thanks to stronger oil. Luck of the draw more than new, organic rally momentum. Broader trend remains decisively bearish (i.e. higher in rate), but with the past 2 weeks both seeing higher rates, there's an opportunity for technical correction as long as econ data doesn't argue against it. Of course Iran/oil remain central to bond market motivations as well.
