LLPA Impact vs Powell Speech. Time to Lock?

Much has been made (by news media... not bond market participants) of Powell's Jackson Hole (virtual) speech on Thursday.  After all, a rethink of the Fed's "framework" sounds like a big deal, right?  The only catch is that they've been talking about that for years.  Powell will have a tough time surprising the market tomorrow, even though anything's possible.  Meanwhile, the removal of the recently-added LLPA is an actual and massively important consideration for loan pricing, locking, and floating.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Durable Goods 11.2 vs 4.3 f'cast, 7.7 prev

  • Cap-ex (excludes defense/aircraft) 1.9 vs 1.9 f'cast, 4.3 prev

  • 5yr auction: reasonably strong (.298 vs .309 f'cast)

Market Movement Recap
08:45 AM

Bonds were weaker overnight, mostly in Asia, and mostly without provocation/correlation.  Decent volume suggests a continuation of this week's curve steepening trend (longer-term rates rising vs shorter-term rates).  10yr up over .71% and MBS down almost an eighth.  A bit of resilience just now after stronger Durable Goods data.

09:27 AM

Nice little bounce, mostly for MBS (now back to unchanged).  10yr yields down a bit, but still up 1.2bps on the day (.699%).  No overt motivation, but not a big enough move to merit a search.

11:09 AM

Nice little bounce evaporated and MBS just hit their AM lows again.  Still inside today's range for now though.

01:11 PM

5yr auction was fairly strong (1bp lower than expected, and very high bid-to-cover).  Longer-term yields didn't respond much, but they DID respond.  10yr yields still higher on the day but down half a bp since auction at .703.  UMBS are pretty sideways, up a tick (0.03) since the auction, but still down a tick on the day.