Even seasoned market-watchers might be thrown for a bit of a loop by today's surprisingly strong bond market rally. After all, we just had a surprisingly strong bond market rally yesterday, taking 10yr yields below 2.57 for the first time this year, and now this morning, they made it all the way down to 2.473, matching the lowest level since last July.
It might not be too much of a puzzler had the 8:30am economic data been extremely poor, but it was quite the opposite. The data unequivocally pointed to weakness for bond markets. In fact, that's precisely what we had, but only for the first few minutes. What's up with that?! Why did it turn around?
Here's a simple breakdown:
Conclusion: the assessment was made. Bond markets were faced with ample positive economic data, yet were forced to follow European bond markets in a counterintuitive direction. To perfectly illustrate this phenomenon, right after EU bond markets closed for the day, Treasury yields began to rise and MBS began to fall.
In other words, prices were propped up by the EU session and are releasing some pressure now. It remains to be seen how far things will go in the other direction, but it's already made for a negative reprice risk situation for Mortgage Rates.
Join Now or Login to Post Comments