The notion of "hope" comes up quite a bit in my daily recap pieces--often because something bad is happening and we hope for it to end or because something good is happening and we hope it can continue.  In today's case, it's both.

Something good has been happening since November when bonds began to push back against the long-term high yields brought about by the strong economic data in Sept/Oct.  That push-back blossomed into the best rate rally we'd seen in 2 years.

Then something bad happened over the past 3 days as that rally experienced its most threatening push back, beginning with the strong jobs report last Friday.  Combined with a Powell speech that soothed the stock market, this "bad thing" kicked off a mini-trend toward higher rates.

Today is the first day that pushes back on that mini-trend (indeed, it's the first day of gains since last Thursday).  It brings hope that the mini-trend can be defeated.  From there, the defeat of the mini-trend would fuel hope that the broader rate rally could continue after what would end up looking like an early 2019 pause.

Keep in mind though, those hopes are all we have at this point.  Today was more of a sideways day than anything.  The bond market gains had a fairly incidental feel to them.  Bond traders are certainly watching a "fizzling" trend in recent stock market gains--hoping that another swoon will fuel more bond buying demand, but things could just as easily go the other way.  

Apart from economic data, the most immediate risk to the short-term outlook is the moderate volatility that would be associated with a big change in the status of the government shutdown.  An absence of traction  in the shutdown negotiations is likely behind some of the fizzle in stocks.  If traction shows up, stocks could pop and bond yields could come along for the ride.  This is all a bit speculative for now, but the point is to not let one day of bond market gains coax you into lowering your defenses when it's not necessarily time to do so.  


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
FNMA 4.0
101-29 : +0-00
Treasuries
10 YR
2.7140 : -0.0140
Pricing as of 1/9/19 6:54PMEST

Today's Reprice Alerts and Updates
A recap of Alerts and Updates provided to MBS Live subscribers.
2:21PM  :  Fed Minutes Offer No Major Revelations
1:39PM  :  Bonds Back on Top After Strong Auction
11:07AM  :  Bonds Break Into Positive Levels, Sort Of...

MBS Live Chat Highlights
A recap of featured comments from the Live Discussion on the MBS Live Dashboard.
Rob Downs  :  "Reality is a bit different from 12/18 - I wouldn't expect big moves on this either way?"
Ted Rood  :  "Sounds dovish to me."
Matthew Graham  :  "SOME FED PARTICIPANTS SAID IT WAS POSSIBLE TO SLOW PACE OF DECLINE IN RESERVES IN APPROACHING THE LONG-RUN LEVEL OF RESERVES -MINUTES"
Matthew Graham  :  "FED PARTICIPANTS DISCUSSION OF FRAMEWORK INCLUDED HOLDING LARGER BUFFER OF SECURITIES -MINUTES"
Matthew Graham  :  "FED PARTICIPANTS HELD DETAILED DISCUSSION OF POTENTIAL LONG-RUN MONETARY POLICY FRAMEWORKS AT DEC MEETING - MINUTES"
Matthew Graham  :  "FED POLICYMAKERS VOTING ON POLICY SAID CHANGES IN STATEMENT LANGUAGE WERE MEANT TO CONVEY IT JUDGED 'A RELATIVELY LIMITED AMOUNT OF ADDITIONAL TIGHTENING WOULD LIKELY BE APPROPRIATE' BASED ON CURRENT INFORMATION -MINUTES"
Matthew Graham  :  "MANY FED POLICYMAKERS SAID FED COULD AFFORD TO BE PATIENT ABOUT FURTHER POLICY TIGHTENING GIVEN MUTED INFLATION PRESSURES -MINUTES OF DEC 18-19 MEETING"

Economic Calendar
Time Event Period Actual Forecast Prior
Wednesday, Jan 09
7:00 Mortgage Refinance Index w/e 987.9 729.9
7:00 MBA Purchase Index w/e 255.2 219.0
13:00 10-yr Note Auction (bl)* 24
14:00 FOMC Minutes *