Big Bond Spike, Mortgage Rate Defiance, Lock or Float?

Today was characterized by an aggressive spike in 10yr yields that paradoxically followed a much weaker jobs report.  The x-factor was/is the motivation that such a report could provide for lawmakers to make something happen on the stimulus front (bigger, sooner, or both).  And bonds don't like stimulus.  Treasuries were hardest hit.  MBS said 'twas merely a flesh wound.  And mortgage rates said "wait, what?  I thought I only needed to look at lender margins."  In other words, mortgage rates did best of all.  The question of how to balance that resilience versus the potentially disconcerting trends in the broader bond market is the focus of today's huddle video.

Econ Data / Events

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

  • Nonfarm Payrolls 245k vs 469k f'cast, 610k prev

  • Unemployment Rate 6.7 vs 6.8 f'cast, 6.9 prev

  • participation down 0.2% (offsets drop in unemployment)

Market Movement Recap
08:13 AM

Bonds opened flat in Asia but sold off slightly during European hours.  10yr yields are starting out roughly 1.5bps higher at .926 and 1.5 UMBS are 1 tick weaker (-0.03).  Bigger moves expected after jobs report.

08:50 AM

Paradoxical weakness despite significantly weaker jobs report (245k vs 610k previously).  Bonds could be reading increased stimulus odds into these numbers or traders could have simply been planning on selling regardless of the outcome.  10yr was as high as .954 but is now back down to .946.  UMBS are 5 ticks (.16) weaker at 100-24 (100.75).

10:52 AM

Losses kicked into slightly higher gear after the NYSE Open as stocks went where we'd expect them to go after today's jobs report (i.e. to a place where fiscal stimulus is much more likely than it was yesterday).  10yr yields are at 9 month highs (.981) and 1.5 UMBS are down more than a quarter point on the day.

02:56 PM

Definitely not seeing a massive bounce back, but at least some semblance of stability.  Both MBS and Treasuries have been fairly flat during the afternoon hours.  Markets traded NFP (aka, stimulus prospects) early and have tuned out for the day.