Stronger Case For Stability, But Not Complacency

With today's solid gains, this week becomes the best argument we've seen for a shift in 2021's rising rate trend.  Without some fundamental shock to the economy or covid outlook, we won't be surprised if this rally has a tough time making huge progress toward lower rates.  For now, it's best thought of as a sideways consolidation, but that's still a big victory compared to most of the rest of the year.  All that having been said, the case for higher rates remains compelling in the bigger picture, so it's important to stay on guard for an eventual relapse of the previous trend.

Econ Data / Events

  • Fed MBS Buying 10am, 1130am, 1pm

  • Jobless Claims 744k vs 680k f'cast, 728k prev

Market Movement Recap
08:15 AM

Modestly stronger overnight with more of the gains seen during European hours.  Steady demand, with some help from ECB meeting minutes.  10yr yields were 1.642 at lows, but are now up to 1.662 after an early stateside bounce.  MBS opening 3 ticks up (+0.09).

09:46 AM

Additional gains, once again right in line with the 9:30am NYSE open.  Treasuries are leading the charge with 10yr yields now down 4.6bps at 1.633.  UMBS 2.5 coupons are up almost a quarter of a point.

12:26 PM

Bonds hit their best levels at 10am, bounced modestly and are now back in line with the best levels.  Supportive comments from Powell are helping.  Current levels match those seen in the last update.

03:08 PM

Calmly consolidating near day's best levels.  10yr yields hit the 3pm close just over 1.63%, almost 5bps lower on the day.  UMBS 2.5s are still roughly a quarter point higher on the day.