MBS Outperformance is Actually Helping Rates

Overnight news of Trump's covid diagnosis caused some volatility in markets that was poised to help the bond market today, but upbeat headlines on fiscal stimulus pushed back in the other direction.  The result?  Same old range for Treasuries, but MBS are pushing the stronger boundary of their range over the past 45 days. Mortgage rates have actually responded, which is notable in this day and age where lender capacity constraints have such a big impact.

Econ Data / Events

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

  • Nonfarm Payrolls 661k vs 850k f'cast, 1022k prev

  • Unemployment Rate 7.9 vs 8.2 f'cast 8.4 prev

  • Participation Rate 61.4 vs 61.7 f'cast (offsets drop in unemployment rate)

  • Consumer Sentiment 80.4 vs 79.0 f'cast, 78.9 prev

  • Factory Orders 0.7 vs 1.0 f'cast, 6.5 prev

Market Movement Recap
08:10 AM

Stocks sold off abruptly overnight as Trump tested positive for covid.  That said, the roughly 1% loss is surprisingly small given the gravity of the news.  The bond movement was even smaller with 10yr yields starting the day down only 1bp.  True testament to the market already being hunkered down for the long haul.  MBS are up 1 tick (0.03) at 103-16 (103.5).

09:38 AM

Bonds losing ground at 9:30am NYSE Open.  10yr up 0.3bps at .683 now and UMBS 2.0 down 1 tick (0.03) at 103-15 (103.47).  No overt headlines behind the move that we can see.  High correlation between stocks and bonds (suggests stimulus reaction).

01:45 PM

Yields were at their highs of the day for the past hour and a half, but just recovered a bit on news (term used loosely) that significant disagreement remains on the stimulus bill.  10yr is 1.3bps higher on the day at .692 and 2.0 UMBS are perfectly unchanged at 103.5.  Stocks and bonds yields have been moving in relative lock-step.

04:26 PM

Drifting uneventfully sideways into the close with 10yr yields and MBS in almost exactly the same shape versus 3 hours ago.