Bonds Recover Somewhat After Weaker Start

Position squaring and ongoing weakness in EU bond markets got US bonds off to a weaker start today.  Lower-than-expected PMI data at 9:45am ET helped turn the tide.  It also emphasized the role of economic data in the road ahead AND the role of “holiday light” trading conditions which can amplify the effects of market movers that otherwise might not move markets quite as much.  By the end of the day, MBS were just barely weaker day-over-day, and 10yr yields were up less than 4bps to 3.49 after being as high as 3.56 intraday.  From here, we’re not planning on reading anything into any movement that occurs in a 3.42-3.62 range and will generally not consider the bond market to be back at full strength until the 2nd week of January.

Econ Data / Events

Jobless claims

211k vs 230k f’cast, 231k prev

Philly Fed 

-13.8 vs -10.0 f’cast, -19.4 prev

NY Fed Manufacturing

-11.2 vs -1.0 f’cast, 4.5 prev

Retail Sales

-0.6 vs -0.1 f’cast, 1.3 prev

Market Movement Recap

09:30 AM modestly weaker overnight.  Additional selling in 8am hour and now again at 9:15am.  No obvious scapegoats.  Fed’s Williams had some hawkish comments on Bloomberg, but they didn’t line up well with selling.  MBS down 3/8ths+ and 10yr up 9bps to 3.542

11:45 AM Nice bounce back heading into mid-day.  MBS now down only about an eighth of a point (best levels today) and 10yr up only 4bps at 3.491.

03:02 PM MBS down less than an eighth and they were briefly in positive territory on the day.  10yr yield up only 3bps at 3.48%.

05:10 PM No major changes from the previous update.  Bonds ended the after hours session with MBS down a few ticks on the day and 10yr yields up 4bps at 3.488%.

Published On: December 17, 2022 / Categories: Mortgage News /