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The holiday-shortened bond trading week began poorly with vaccine news causing a massive yield spike. Tuesday didn't do too much to allay fears, but it did introduce the possibility of a supportive ceiling in Treasury yields. Thursday's trading reinforced that ceiling and today we'll see whether bonds can build on that victory or if they're merely playing strong defense at those higher yield levels. The biggest risk on the horizon is a vaccine trial announcement expected from Moderna any day now. In that regard, bonds are hoping for "no whammies" today, but are likely to remain cautious until the vaccine news hits.
If Moderna's announcement corroborates the recent Pfizer announcement, bonds could keep adding to the more sharply negative momentum that began in October. That's referred to below as the "October approach." But even if the reaction to Moderna is ho-hum, we still have the "big bounce approach" to contend with. One of these two uptrends must be defeated sooner or later.
The time frame for that defeat will depend on a diverse list of factors including:
vaccine hopes
the senate race in Georgia (2x democratic victories would likely push rates higher)
covid case counts heading into the winter months
the extent to which local governments enact new lockdowns
the extent to which the economy is responding negatively to rising covid case counts and lockdowns (i.e. we have much more covid now than we did in March-July, so if the economy can muddle through with stronger numbers, traders will definitely begin moving away from the post-covid low rate regime that saw 10yr yields locked in the basement under 1.0%).
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MBS Commentary
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The holiday-shortened bond trading week began poorly with vaccine news causing a massive yield spike. Tuesday didn't do too much to allay fears, but it did introduce the possibility of a supportive ceiling in Treasury yields. Thursday's t... (read more) |
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Housing News
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The National Association of Realtors® (NAR) said on Thursday that home prices have continued to grow in each of the 181 areas it tracks for its quarterly metro home price report. Both record-low mortgage rates and depleted inventories of existing... (read more) |
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Rob Chrisman
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Welcome to the first Friday the 13th of 2020 since March. What an eight months! Cindy E. writes, “The longer I stay at home, the more homeless I look.” I start fielding emails every year around this time about the following year’s c... (read more) |
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Housing News
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The number of COVID-19 related forbearances plans headed downhill at an increasing pace over the last few week although there is no guarantee the improvement will continue. Black Knight says there was another 4 percent decline , representing 121,000 ... (read more) |
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Mortgage Rate Watch
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Earlier in the month, mortgage rates rose somewhat abruptly as lenders got in a defensive position ahead of the election. They'd learned in 2016 just how volatile the bond market (the key ingredient in the rate movement equation) could be after an el... (read more) |
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Housing News
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Mortgage applications , especially for home purchases, pulled back from the previous week's level. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 0.5 percent on a seasonally adjusted... (read more) |
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