MBS Live Day Ahead: It's Still a Waiting Game

There really wasn't much by way of riveting new developments on the radar heading into this week.  A smattering of Fed speakers and relatively inconsequential data in early July aren't up to the task of creating big-picture momentum in the age of coronavirus.  That's not to say the Fed or the econ data cannot move markets--simply that more important versions would be required.  For instance, we would need something like an official Fed policy change or a truly surprising shift in data confirmed across multiple significant reports.  That's hard to accomplish with only one significant piece of data this week having already come out on Monday.

For bonds (and stocks for that matter), we've officially begun the waiting game.  The prelude to this was the April/May push back toward more risk-tolerant market levels and the subsequent reconsideration of that risk-tolerance due to rising covid concerns.  In directional terms, this equates to a move higher for bond yields followed by a move lower--pretty simple stuff.  Until the market shows us some other reality, the baseline assumption is that we're back in the dominant post-covid-shock range of .58-.74 in 10yr Treasury yields.

Mortgage rates have improved more consistently than Treasury yields because they performed so poorly by comparison earlier in the saga.