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mortgagenewsdaily@www.mortgagenewsdaily.com
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Mortgage News Daily provides comprehensive daily coverage of mortgage rates including our daily rate survey and market commentary. We also cover mortgage backed securities markets, housing news, housing data, etc.

Follow mortgage rates with our daily survey and market commentary. Track MBS and Treasury markets and stay up to date on the latest housing news.

 

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86 Posts
MBS Live Morning: Another Stock Swoon Keeping Bonds in Check

The entire week has been dominated by a close correlation between stock prices and bonds yields.  This has been especially noticeable after 9:30am ET on any given day (the NYSE opening bell, when more liquidity and volume hit the market), but even outside those hours, there's been enough correlation that it makes sense to keep an eye on stocks at the moment.  It also serves as a reminder that this week's bond rally may be more fragile than it seems, depending on what the stock market does next.

In

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MBS Live Morning: Another Stock Swoon Keeping Bonds in Check
MBS Live Recap: How Low Can Stocks Go? (Bonds Want to Know)
How Low Can Stocks Go? (Bonds Want to Know) Bonds improved overnight and again after this morning's Philly Fed data (a dark horse market mover to be sure).  10yr yields hit their lowest levels in 3 weeks, and at one point were almost 40bps below the highs of 3.2% seen 2 weeks ago.  Bonds may have already been destined to reject 3.2% and recover, but there's no question that the heavy selling in stocks has really accelerated the recovery--so... more
MBS Live Recap: How Low Can Stocks Go?  (Bonds Want to Know)
MBS Live Morning: Time to Move The Goalposts on The Trend?

Remember when the Fed began to abruptly revise its policy tightening pace at the start of the year and both stocks and bonds began to sell off?  That's the logical play for markets when the Fed ratchets up its tightening pace, but by the end of March, stocks were able to bounce enough to allay fears about the onset of a bear market.  The bounce proved to be a dead cat, and 6 weeks later, the bear is at the door or already in the living room if you ask the NASDAQ.  Even the S&P (via futures) is at

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MBS Live Morning: Time to Move The Goalposts on The Trend?
MBS Live Recap: 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... more
MBS Live Recap: What Does Today's Rally Mean For The Bigger Picture?
MBS Live Morning: Reversal Reversing?

One side effect of following the market very closely during times of heightened volatility is that the short term developments on any given day run a high risk of contradicting the developments of the previous day.  This is one reason that we have a longer term baseline, both for the trend in rates and for the targets required to consider a change in that trend.  But headlines would get boring if every one was "______ today, but general trend continues."  So instead we have headlines like "reversal reversing?" 

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MBS Live Morning: Reversal Reversing?
MBS Live Recap: Another Head Fake Comes and Goes With Help From Data and Powell
Another Head Fake Comes and Goes With Help From Data and Powell As of yesterday, bond yields looked like that at least had a chance to remain under the 2.92% pivot point after breaking below it for the first time in 2 weeks last Thursday.  With a bit of weakness this morning, yields began the day right at 2.92.  After the stronger Retail Sales data, it was game over.  Selling pressure continued throughout the day and it found no solace... more
MBS Live Recap: Another Head Fake Comes and Goes With Help From Data and Powell
MBS Live Morning: Strong Data and Overseas Recovery Reinforcing a Floor For Yields

Bonds have had a good run recently--perhaps their best when it comes to arguing for a ceiling to cap the brutal rate spike of 2022.  The week began with enough strength to keep hope alive that the friendly correction could continue, but not quite enough strength to avoid worrying that we were simply seeing a set-up for a broader sideways range. The latter would make good logical sense considering inflation would need to drop significantly before bonds rallied in a sustainable way and that inflation data

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MBS Live Morning: Strong Data and Overseas Recovery Reinforcing a Floor For Yields
MBS Live Recap: Bonds Hold Decent Gains to Start New Week
Bonds Hold Decent Gains to Start New Week After mixed trading overnight, bonds began the day in the US at relatively unchanged levels before rallying throughout the morning hours.  There has been a good amount of correlation between stocks and bond yields over the past week.  Oil prices joined that bandwagon on Thursday and the correlation continued right up to the 8:20am CME open.  At that point, new trades for the new week along with global... more
MBS Live Recap: Bonds Hold Decent Gains to Start New Week
MBS Live Morning: Closely Watching For Signs of a Ceiling

Bonds shook off a bit of weakness in Europe to start the new week in slightly stronger territory.  Gains have continued into domestic hours, which brings yields closer to Thursday's lows.  Breaking below those would mean we're at the best levels in 3 weeks.  

Ever since breaking above 2.40% (10yr) in March, we've been watching and waiting for signs of a rate ceiling.  Those efforts have been been with a series of disappointments and additional runs toward higher rates.  That said, each attempt

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MBS Live Morning: Closely Watching For Signs of a Ceiling
MBS Live Recap: Weaker Today, But Stronger vs Last Week. Stocks in Control
Weaker Today, But Stronger vs Last Week. Stocks in Control Blaming stocks for movement in the bond market (and vice versa) is usually a cop out, but occasionally relevant.  The latter is arguably the case this week as Monday saw a big drop in stocks to the lowest levels in over a year (depending on the index). It took bonds a while to catch on, but once they did, they spent most of the rest of the week moving the same direction.  Today was no exception,... more
MBS Live Recap: Weaker Today, But Stronger vs Last Week. Stocks in Control
MBS Live Morning: Friend or Foe? Stocks Turning on Bonds After Helping Most of The Week

The relationship between stocks and bonds is much more complicated than most people assume.  Conventional wisdom holds that stock prices and bond yields correlate with each other, but never forget:

never forget.png

To make matters more confusing, despite the INVERSE relationship over the longer run, there are definitely pockets of time where investors are

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MBS Live Recap: Finally Time to Start Entertaining an Actual Shift?
Finally Time to Start Entertaining an Actual Shift? Bonds have made several attempts to consolidate and bounce at various times during the rapid sell-off that began in early March.  Each of those attempts has been met with frustration and additional weakness.  While the present example may ultimately prove to be no different, it's at least shaping up with a few more things going for it.  These include the lowest inflation expectations... more
MBS Live Morning: Yields Testing Lower Technical Floors as Consolidation Case Grows
For the first time in months (and longer than that if we factor out the artificial/temporary boost from the Ukraine flight to safety) bond yields are in the lower half of their range over a 4 week time frame. In fact, really only April 25, 26, 27 were noticeably better than today. The 2.83% technical level provides a convenient dividing line for that bull vs bear debate, but what has the bulls out in force on this auction week with higher consumer inflation? This morning's producer price index might provide... more
MBS Live Recap: Bonds Bounce Back Despite Hotter Inflation Data
Bonds Bounce Back Despite Hotter Inflation Data Feel free to call it a comeback, but don't ask why it happened.  Today's bond rally is an answer in search of a question or a solution in search of a problem.  You get the idea.  There were only 2 kinds of market participants who expected a medium-big bond rally to follow a hotter CPI print: perma-bulls and lucky guessers.  Any factual, objective attempt would rely on... more
MBS Live Morning: Stocks, Bonds, and Rate Hike Expectations Reacting to CPI; MBS Roll

Both at the headline and core levels, April's Consumer Price Index (CPI) came in hotter this morning.  This was a high-consequence report for bonds, and they're acting the part with a big reversal of overnight gains and early weakness in MBS.  Stocks were also swept up in the implications for Fed policy (i.e. higher inflation = tighter Fed policy = bad for both stocks and bonds).

20220511 open1.png

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MBS Live Recap: Another Solid Day, But It's All About Wednesday's CPI
Another Solid Day, But It's All About Wednesday's CPI Bonds managed to post a 2nd consecutive day of gains on Tuesday--a feat seldom seen in 2022 apart from the initial flight to safety at the start of the Ukraine war.  Actual motivations for the gains are as hard to justify as the motivations for the sell-off last Friday.  One looks like a correction to the other.  If forced to name names, we might point to tempered comments from several... more
MBS Live Recap: Another Solid Day, But It's All About Wednesday's CPI
MBS Live Morning: Hedging For CPI or A Genuine Correction Attempt?

For the 3rd or 4th time (depending on your standards), yields are attempting to find a ceiling after launching abruptly higher in early March (1.67% to 3.20% trough to peak in 2 months).  Yesterday's 3.20% reading from the overnight session seems fairly high compared to this morning's sub 2.97% levels.  What's up with the big reversal?  First off, it's covered about the same amount of ground as the last reversal attempt at the end of April. 

Additionally, while this would be a strong move for only

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MBS Live Morning: Hedging For CPI or A Genuine Correction Attempt?
MBS Live Recap: Big Bond Rally to Start The New Week
Big Bond Rally to Start The New Week In spite of potential headwinds in the coming days (CPI data and Treasury auctions, specifically), bonds are off to the races so far this week.  That wasn't destined to be the case in the overnight session as 10yr Treasury yields hit new long-term highs of 3.20%, but things only improved from there.  Another big drop in stocks helped fuel some safe-haven demand.  Lower oil prices didn't hurt.  We can also consider... more
MBS Live Morning: Liquidity Issues Making MBS Prices a Moving Target
Depending on when you looked this morning, MBS prices may have been red or green, and the gap between any two quotes was rather large (a quarter of a point or more at times).  This has to do with the ongoing deterioration of liquidity in the MBS market.  The following chart explains this best.  The green line is what buyers are willing to pay and the orange line is where sellers are willing to sell.  The blue lean measures the gap between the two.  The higher the blue line, the worse... more
MBS Live Recap: Rates Give Up After Briefly Trying to Hold Yesterday's Ceiling
Rates Give Up After Briefly Trying to Hold Yesterday's Ceiling There really weren't any new reasons for the bond market to abandon all hope and sell off to even higher yields today, but they found some nonetheless.  One of the only valid considerations was the active trading of the yield curve which is currently seeing the front end of the market price out any major risk of a 75bp hike in June.  At the same time, the Fed confirmed the normalization timeline... more
MBS Live Morning: Jobs Report Overlooked as Bonds Consolidate at Defensive Levels
The jobs report is traditionally the most important piece of economic data on any given month.  It's even had the power to move the bond market as recently as early 2022 despite the labor market being cemented as a star performer.  Now this morning, the jobs report came out roughly in line with expectations, but bonds nonetheless sold off--seemingly in response.  But the fact of the matter is that traders often show up to NFP day with trading strategies that aren't based on the NFP results themselves. ... more
MBS Live Recap: Big Sell Off After a Nice Rally. Blame The Fed Either Way?
Big Sell Off After a Nice Rally. Blame The Fed Either Way? Today was one of the rare breed where both stocks and bonds made massive moves without any indisputable, overt, new justification.  It was a gradual, methodical move by intraday standards.  It came on slowly at first, accelerated into the crux of AM liquidity hours, and faded in the afternoon.  While we can point to one or two individual considerations, none of them are up to the task of explaining... more
MBS Live Morning: Big, Ugly Morning For Bonds (And Stocks)
Solid Fed day and solid rally in response yesterday...  Now today, it's not just a complete 180°, but a 180° plus more insult to injury as yields surge to new long-term highs.  Money has flooded out of both sides of the market prompting discussions about "risk-parity" trades.  For bonds' part, there are definitely steepening trades (selling longer-term bonds more than shorter-term bonds) driving some of the weakness.  Corporate bond issuance isn't helping.  Nor is the technical break... more
MBS Live Recap: Fed Finally Sticks to Script. Bonds Like It
Fed Finally Sticks to Script. Bonds Like It Fed days have seen a series of increasingly hawkish adjustments since last September.  This one is stands out as the first since then where the Fed has bowled right down the middle.  Powell only helped the cause during the press conference.  without another hawkish adjustment or warning from Powell in the press conference. The biggest turning point followed Powell's assertion that 75bp hikes are off... more
MBS Live Commentary: Differences Between Previous and Current FOMC Statements
Indicators Although of overall economic activity edged down in the first quarter, household spending and employment business have fixed continued investment to remained strengthen strong . Job gains have been strong robust in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures. The invasion of Ukraine by Russia is causing tremendous... more
MBS Live Morning: 50bp Hike, Normalization Details, And an Important Powell Press Conference
At the risk of repeating too many words from yesterday's recap, we'll leave it at this: the Fed will hike by 50bps today.  It won't be a surprise to the market.  The Fed will also almost certainly announce a plan to reduce bond holdings with a baseline time frame of 3 months and "caps" that will eventually only allow reinvestments of proceeds that exceed $60bln in Treasuries and $35bln in MBS per month.  Of more concern is the way the Fed balances inflation fighting efforts against the prospect... more
MBS Live Recap: Fed Day Preview: What Are They Doing and How Much Will Bonds Care?
Fed Day Preview: What Are They Doing and How Much Will Bonds Care? Given all the bond market volatility seen recently, the outlook for tomorrow's Fed announcement is surprisingly well understood by market participants. Both Fed speakers and Fed Fund Futures agree on a 50bp hike as a virtual certainty.  We also know the Fed is highly likely to announce a start date for balance sheet normalization.  They were even kind enough to lay out a normalization game plan... more
MBS Live Morning: Setting a Pre-Fed Range on a Mostly Data Free Day
10yr yields came into the day looking comfortable in the rejection of the 3% ceiling that was briefly tested yesterday and overnight.  That occurred amid significant curve steepening (thinks 2s and 10s moving farther apart).  Now today's them is back to flattening (2s and 10s closer together).  In fact, more than anything, it's been the yield curve that has found a trading range heading into the Fed.  This makes sense as the market balances the rate hike outlook (which affects 2s more) against... more
MBS Live Recap: Rocky Start to Fed's Normalization Revelation Week
Rocky Start to Fed's Normalization Revelation Week The Fed has been in full-fledged policy tightening mode in 2022, with multiple increases in the level of concern.  More concern means faster removal of accommodation.  The key reason for the big rate spike at the start of April was the allusion to balance sheet normalization, both by Vice Chair Brainard and in the Fed Minutes release.  The Minutes laid out a specific target for normalization's cruising... more
MBS Live Morning: Active Week of Data Headlined by Wednesday's Fed Announcement
In addition to bringing the typical big market movers scheduled for the first week of any given month, we'll also get a fairly important Fed announcement on Wednesday.  The market views a 50bp hike as a foregone conclusion and generally feels the same way about a balance sheet normalization announcement.  The latter is subject to some variability in terms of how the Fed implements it although the baseline is as easy as looking at the minutes from the last meeting.  Any deviation from that could... more
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