What Does Today's Rally Mean For The Bigger Picture?

What Does Today's Rally Mean For The Bigger Picture?

Bonds began the day in flat to slightly weaker territory, but that didn't last long.  A gigantic wave of selling in equities markets grew to tsunami-like proportions as the day progressed.  Unlike many other examples of days where stocks fall 3-4% by noon, there was no major attempt to recover before the 4pm NYSE close.  It was very clear throughout the day that the progressively larger selling spree in stocks was responsible for the progressively larger rally in bonds.  With oil prices following the same path, "global growth concern" was the topic of the day.  With all this being the case, today's bond rally, in and of itself, means very little for the bigger picture because its existence is predicated on ongoing stock losses.  

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What Does Today's Rally Mean For The Bigger Picture?

MBS & Treasury Markets
UMBS 4.0 99.34 +0.36 10YR 2.832% -0.052% 5/19/2022 7:12AM EST
Stocks are having a very bad day.  S&P futures are down almost 4%.  These giant-sized sell-offs can't help but spill over to bonds, and that's been the primary motivation all day.  This is just an update to that ongoing process. 10yr yields are now down more than 10bps at 2.891.   4.0 UMBS are up only 3/8ths of a point, but that is consistent with the yield curve flattening (i.e. shorter duration debt isn't gaining as much as longer-term bon...   READ MORE
Today's Mortgage Rates
30YR Fixed 5.44% -0.01% 15YR Fixed 4.85% +0.01% 5/18/2022
There has been a lot of volatility in the bond market recently.  Because bonds drive interest rate changes, that's meant plenty of volatility in the mortgage market as well.  The month of May has been less universally awful compared to March and April, one of the worse 2-month stretches in the modern history of rates.  But in transitioning from "awful" to "something else," mortgage lenders are scrambling to set rates at the right levels. Yesterday saw the bon...   READ MORE
Economic Calendar
Time Event Period Actual Forecast Prior
Thursday, May 19
8:30AM May Philly Fed Business Index May 16.0 17.6
8:30AM w/e Jobless claims 4-wk avg (k) w/e 192.75
8:30AM w/e Continued Claims (ml) w/e 1.320 1.343
8:30AM w/e Jobless Claims (k) w/e 200 203
10:00AM Apr Existing home sales (ml) Apr 5.65 5.77
10:00AM Apr Exist. home sales % chg (%) Apr -2.7
10:00AM Apr Leading index chg mm (%) Apr 0.0 0.3
10:30AM w/e Nat gas-EIA, change bcf w/e 87 76
1:00PM 10-yr TIPS Auction (bl) 14
Friday, May 20
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Mortgage rates have moved higher at the fastest pace in decades so far in 2022, but this week proved to be a refreshing exception.  To understand why, we first need to examine the relationship between stocks and bonds, which is a bit more variable than most people assume.  Conventional wisdom holds that stock prices and bond yields correlate with each other.  This makes good logi... READ MORE