Remember last Wednesday?  Rather forget it?  Yeah, me too.

That was the day that bond yields spiked last week.  The size and speed of the move was out of line with any of the common explanations.  These things happen, of course, and when they do, it's best to focus on what's true and to admit that no one should even be able to know why everyone is making every trade in any given market.  Yet that's exactly what tends to happen when volatility strikes the stock market.

Today was the stock market's turn to have its explanation-defying selling spree, and it made last week's bond move look a bit tame by comparison.  The financial media--respected or otherwise--had a field day with it.  But it wasn't the kind of field day that was fun and exciting.  Rather, it was hard to watch.  I genuinely felt bad for some of the people I saw trying to make sense of the nonsensical, and I vowed to myself to remain vigilant should the need to admit ignorance arise in the future.

Some examples of the nonsense include blaming the stock sell-off on the following:

  • high rates 
  • China, because they are back from vacation
  • China, because they have to do something with their currency 
  • China, because they're weaponizing their foreign assets and using them against the American consumer
  • The Fed's "shift" away from accommodation (as if it was a new thing that happened today)
  • The hurricane

I'm sure there were more, but at some point in the day, I couldn't hear the news anymore over the sounds of my own yelling.  I look forward to sharing that rage with you in as entertaining as way as possible tomorrow.  For today, suffice it to say that no one knows anything about anything today.  Well, actually, I do know one thing personally: the bond market reaction to the move in stocks was either pathetic or telling--probably both. 

It was pathetic because bonds didn't so much as bat an eyelash at the first 50 points of S&P losses, and they did so only grudgingly with the next 50 points.  Moreover, bonds couldn't even manage to turn positive during the official Treasury trading hours.  A closer examination reveals today's entire bond rally happened well after 3pm ET.

It was telling because it was pathetic.  If this is the best that bonds could do with a big home-run pitch from stocks, then no one is excited about buying bonds.  

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 4.5
102-14 : +0-01
10 YR
3.1742 : -0.0338
Pricing as of 10/10/18 6:34PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
3:50PM  :  Bonds Feign Concern Over Stock Sell-Off
1:49PM  :  ALERT ISSUED: Negative Reprice Risk Increasing
1:08PM  :  Uneventful 10yr Auction
10:19AM  :  Stocks Actually Helping For a Change
8:37AM  :  Bonds Losing Some Ground Despite As-Expected Producer Prices

Economic Calendar
Time Event Period Actual Forecast Prior
Wednesday, Oct 10
7:00 MBA Purchase Index w/e 238.0 240.7
7:00 Mortgage Refinance Index w/e 921.2 945.9
8:30 Core Producer Prices YY (%)* Sep +2.5 2.5 2.3
8:30 Producer Prices (%) Sep +0.2 0.2 -0.1
10:00 Wholesale sales mm (%) Aug +0.8 0.2 0.0
10:00 Wholesale inventories mm (%) Aug 1.0 0.8 0.8
11:30 3-Yr Note Auction (bl) 36
13:00 10-yr Note Auction (bl)* 23