10yr Yields at 0.96% a Best-Case Starting Point For a Bad Reaction in Bonds

The election (referring both to the presidency and the composition of the Senate) is the biggest of actionable information since the pandemic first rocked markets in March. Yields have been pushed up to their 2nd to last post-covid ceiling at .88% (next stop would be .96%).  Many market participants see this as bonds' way of cautiously pricing-in a blue sweep.  Since that scenario is far from a given, it means a showdown with 0.96% 10yr yields would be a best-case starting point if the blue sweep is confirmed (assuming that the prevailing logic is correct, of course... unlike 2016).  It can be argued both ways.  The argument can only be won with the benefit of hindsight.  It makes more sense to err on the side of caution until then, even though mortgage rates remain extremely well-insulated from broader bond market volatility.

Econ Data / Events
Market Movement Recap
08:36 AM

Bonds were weaker overnight with 10yr yields as high as .88% just before 5am ET.  Stock are up over 1% and that's one of the only explanations for bond weakness, apart from bonds simply staging near their highest levels in months for a potential breakout depending on tonight's election results.  MBS are outperforming but still down 3 ticks (0.09) trading just over 103.

11:10 AM

Treasuries showing true colors (of fear) heading into election night with 10yr yields up 4.24bps to .8942% (highest since early June's .96%).  MBS are outperforming but 2.0 UMBS are still down an eighth at 103.00.  Stocks are up more than 2%, making today a clearer example of a "risk-on" move.

01:38 PM

2.0 UMBS were briefly up 1 tick (+0.03) but are now down 2 ticks (-0.06) at 103-02 (103.06).  Fed bond buying operations revealed both positive and negative supply considerations that drove the volatility.  10yr yields are up 2.4bps on the day at .876, well off the 11am highs at .8976.  Stocks have cooled off a bit as well, now up only 1.8% versus over 2% earlier.  No overt market movers in play.  Everyone waiting on election night.