MBS Live Morning: More New Multi-Year Highs For Rates
MBS Live Morning: More New Multi-Year Highs For Rates
Another day, another brutal sell-off with little by way of compelling justification. This one may actually be more simple than it seems at first glance. European bond markets have been closed since Thursday and have had some catch-up to do with US bond market weakness. This spilled over in the form of moderate US bond weakness overnight and domestic sellers are jumping on the bandwagon. There's additional pressure from an uptick in higher profile corporate bond offerings as well not to mention the simple nature of the longer term trend.
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Another day, another brutal sell-off with little by way of compelling justification. This one may actually be more simple than it seems at first glance. European bond markets have been closed since Thursday and have had some catch-up to do with US bond market weakness. This spilled over in the form of moderate US bond weakness overnight and domestic sellers are jumping on the bandwagon.
There's additional pressure from an uptick in higher profile corporate bond offerings as well not t...
Another day, another brutal sell-off with little by way of compelling justification. This one may actually be more simple than it seems at first glance. European bond markets have been closed since Thursday and have had some catch-up to do with US bond market weakness. This spilled over in the form of moderate US bond weakness overnight and domestic sellers are jumping on the bandwagon.
There's additional pressure from an uptick in higher profile corporate bond offerings as well not t...
By last Friday, not only had the bond market seen a 2-week improvement for the first time all year, but the ground covered during those 2 weeks was bigger than any other 2 week period going back to the start of the pandemic. That's the good news. The bad news is that the gains were made possible by yields hitting 3.20% on May 9th. The other bad news is that the gains have been largely dependent on heavy losses in the stock market. As stocks bounce back today, so too have bond yields. N...
By last Friday, not only had the bond market seen a 2-week improvement for the first time all year, but the ground covered during those 2 weeks was bigger than any other 2 week period going back to the start of the pandemic. That's the good news. The bad news is that the gains were made possible by yields hitting 3.20% on May 9th. The other bad news is that the gains have been largely dependent on heavy losses in the stock market. As stocks bounce back today, so too have bond yields. N...
***REQUIRED READING for anyone who doesn't fully understand why the 4.5 UMBS coupon is far better to follow than the 5.0 intraday (for now).*** The morning commentary is typically focused on market movement and broader bond market considerations for the rest of the day. Today, however, there's an urgent need to discuss an often confusing topic when it comes to the bond market's relationship with mortgage rates: which MBS coupon should you be watching? In the past, for the most part, that's b...
***REQUIRED READING for anyone who doesn't fully understand why the 4.5 UMBS coupon is far better to follow than the 5.0 intraday (for now).*** The morning commentary is typically focused on market movement and broader bond market considerations for the rest of the day. Today, however, there's an urgent need to discuss an often confusing topic when it comes to the bond market's relationship with mortgage rates: which MBS coupon should you be watching? In the past, for the most part, that's b...
At the risk of repeating ourselves regarding bond market trends of the past few months, 2022's initial rate rout clearly gave way to something more 'sideways' in May. Even as yields seemed to be rallying, they were only doing so in the confines of what had to be a sideways trend. No over the past week, that trend was reinforced by a hard bounce off the floor. Call it 2.72% if you like. The weakness is sufficient to ask if it's already time to start considering ceiling levels for the side...
At the risk of repeating ourselves regarding bond market trends of the past few months, 2022's initial rate rout clearly gave way to something more 'sideways' in May. Even as yields seemed to be rallying, they were only doing so in the confines of what had to be a sideways trend. No over the past week, that trend was reinforced by a hard bounce off the floor. Call it 2.72% if you like. The weakness is sufficient to ask if it's already time to start considering ceiling levels for the side...
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 of t...
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 of t...
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 "re...
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 "re...
There is a highly reliable track record of the bond market moving quickly to get in position for the Fed's expected course of action. When those expectations shift gradually over time, or when there is balance in the debate about the direction of the policy shift, bonds refrain from big, scary spikes. 2022 has been characterized by the opposite scenario where the Fed has repeatedly nudged market expectations, but by accelerating the actual removal of accommodation and by doubling down on haw...
There is a highly reliable track record of the bond market moving quickly to get in position for the Fed's expected course of action. When those expectations shift gradually over time, or when there is balance in the debate about the direction of the policy shift, bonds refrain from big, scary spikes. 2022 has been characterized by the opposite scenario where the Fed has repeatedly nudged market expectations, but by accelerating the actual removal of accommodation and by doubling down on haw...
CPI (the Consumer Price Index) is arguably the most important data point for interest rates in a world where inflation is at the highest levels since the 80s and the Fed is not currently worried about the labor market (otherwise, NFP would still command more respect). Markets were concerned that this morning's release could be even hotter than forecasts suggested (granted, most of the year-over-year increase at the core level was expected due to "base effects").
As it happened, monthly CPI...
CPI (the Consumer Price Index) is arguably the most important data point for interest rates in a world where inflation is at the highest levels since the 80s and the Fed is not currently worried about the labor market (otherwise, NFP would still command more respect). Markets were concerned that this morning's release could be even hotter than forecasts suggested (granted, most of the year-over-year increase at the core level was expected due to "base effects").
As it happened, monthly CPI...
Yields Recover After New Long-Term Highs Overnight
Treasury yields rose to new long-term highs during the first hours of the overnight session as Japan announced a plan to buy unlimited domestic debt (thus leaving less bond buying demand for foreign markets, including Treasuries). Things changed in Europe with Treasuries bouncing back to lower yields right at the EU open. Steady gains continued into the 10am hour and leveled off sideways after that....
Yields Recover After New Long-Term Highs Overnight
Treasury yields rose to new long-term highs during the first hours of the overnight session as Japan announced a plan to buy unlimited domestic debt (thus leaving less bond buying demand for foreign markets, including Treasuries). Things changed in Europe with Treasuries bouncing back to lower yields right at the EU open. Steady gains continued into the 10am hour and leveled off sideways after that....
NFP Friday rarely falls on the first day of the month/quarter. The last time it happened in April was 2016, and it was wholly uneventful. The same might be said of the current iteration with bonds trading well inside the week's range. Now on Monday, the domestic trading range is trading inside Friday's range. In other words, bonds have gone out of their way to be sideways and range-bound over the past 2 days, thus leaving us very much in "wait and see" mode when it comes to assessing the...
NFP Friday rarely falls on the first day of the month/quarter. The last time it happened in April was 2016, and it was wholly uneventful. The same might be said of the current iteration with bonds trading well inside the week's range. Now on Monday, the domestic trading range is trading inside Friday's range. In other words, bonds have gone out of their way to be sideways and range-bound over the past 2 days, thus leaving us very much in "wait and see" mode when it comes to assessing the...