Bonds Scratch Out Victory Despite Headwinds


Had it not been for a fairly abrupt sell-off in stocks (the first big day of losses in 2018, and the biggest open-to-close sell-off since late August for some major averages), there’s no guarantee that bonds would have ended the day stronger.  Even then, only some  of the yield curve was stronger–specifically 7yr notes and higher.

This is part of the “curve flattening” trade that dominated 2017 (2yr and 10yr yields getting closer together).  That trade grew volatile at the end of the year as well as last week, corresponding with our last 2 big sell-offs.  As the curve flattened over the past few business days, longer-term yields (which more closely follow mortgage rates) have been able to hold under key ceilings (like 2.60% in 10yr yields).

There are important floors too–like 2.52% in 10yr yields.  Bonds aren’t yet willing to challenge those, but that’s what would need to happen if the past few days are to be something other than a consolidation amid a broader move toward higher rates.  As far as today was concerned, there was a fairly clear bounce right at 2.52%.  On a positive note, however, we were nowhere close to testing the recent 2.60% ceiling.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


FNMA 3.5

101-30 : +0-00


10 YR

2.5389 : -0.0131

Pricing as of 1/16/18 4:59PMEST

Today’s Reprice Alerts and Updates

2:28PM  :  Friendly Bounce For Bonds Thanks to Stocks

11:51AM  :  ALERT ISSUED: Under Some Pressure; Reprice Risk Slowly Growing

10:36AM  :  Still Modestly Stronger, But Bouncing at Important Floor

MBS Live Chat Highlights

Ted Rood  :  “definitely. Almost like yield curve has tightened”

Timothy Baron  :  “YES”

Paul Philbin  :  “Are you guys seeing the spread between 15yr rates and 30yr rates closer. Like difference of .125 to .250 where it use to be .5 or more ?”

Dan Draitser  :  “nice turn there”

Original Source