MBS Live Morning: The Shift Continues, Even If You Can't See It

It's an interesting time for rates because the market collectively knows where it should be going (i.e. toward even higher rates), yet seems to be dragging its feet in getting there.  That's not to say rates aren't higher in the past few weeks, but 10yr yields continue to avoid a decisive break above the high yields seen on Friday the 8th.  What about other Treasury maturities though?  A quick glance at the 30yr and 5yr helps bring everything into focus.

Translation: 5yr yields are doing a half of a point worse than 30yr yields in the past 5 months (in fact, these are the highest 5yr yields since before the pandemic). 

What's up with that?  5s are uniquely positioned to suffer in this environment.  They're long-term enough to share some concerns with 10s and 30s, but short-term enough to be impacted by the rate hike outlook.  Traders are actively betting on the shape of the yield curve recently, even when it looks like bonds are flat based purely on 10yr yields.

Bonus Charts: Covid heat map and temperature heat map 

What's the takeaway?  Nothing new here... Cold weather forces more people indoors, in turn increasing covid transmission.  It's impossible to know if the relationship will continue to be this linear going forward, but if so, it helps explain why longer-term rates haven't been keen to move directly to 1.75%+ in October.