It was heartening to see bonds erase yesterday's losses by the time domestic trading got underway today. Unmitigated victory would have required flat/higher oil prices. Instead, we were forced to wonder how much credit to give lower oil prices versus the expectation that longer-term rates would paradoxically appreciate a more hawkish Fed stance. This uncertainty increasingly vanished throughout the day. Oil prices steadily rose more than $3 between 8:30am and 1pm, but bonds were sideways to stronger the entire time. There's still some caution suggested by a technical floor at 4.94%, but yields are now flirting with a break below that level in after-hours trading (even as oil prices remain more than $2 higher than this morning). We're not out of the woods yet, but today looks to have been a step in the right direction. All this having been said, rates aren't immune from future spikes if econ data, issuance, or fuel prices surprise to the upside.
MBS up almost half a point and 10yr down 7.7bps at 4.942
01:56 PM
MBS up half a point and 10yr down 7.2bps at 4.946
03:20 PM
Best levels of the day. MBS up 18 ticks (.56) and 10yr down 8.5bps at 4.934
Lock / Float Considerations
9/17/26 - While Thursday didn't necessarily deliver strong enough momentum toward lower rates to mark a bigger picture trend reversal, it was more than enough to vet the Fed week thesis that a rate hike didn't need to spell doom for mortgage rates. From here, 4.94% has emerged as an important resistance level to break in terms of 10yr yields. Moving below would allow for an incremental notch of optimism for the risk averse crowd. The risk-tolerant crowd may have already seen enough of a bounce today, but we'd feel more confident about that if it had occurred amid flat/higher oil prices.
