At one point in time (and perhaps to this day) if you'd asked the average bond market watcher to name the top 3 months for volatility, October would definitely have made the list.  There are several potential reasons for that--the biggest one being that for more than a decade, bonds have been far more likely to rally for a few months at some point in the middle of the year and sell off (or at least end the positive trend) heading into the end of the year.  What are some potential reasons for October filling this role?  First off, it's really not any more guilty than any other Q4 month due to the surprisingly cyclical nature of the long-term bond rally.  In fact without major monetary policy changes from the Fed in 2013 and ECB in 2014, those two years would have had a better chance to have their own blue rectangles in the chart above.  That would have put the total at 9 or 10 years out of 11 (depending whether or not you want to count 2011).   Beyond the cyclical argument, October is the first month of a new fiscal year for the US government.  It's the first month where markets are fully back in action after the summer months.  And it's the last month before the apex holiday months of Nov/Dec. In other words, it's uniquely situated to push back on summertime momentum that was accelerated by illiquidity and to serve as the year's last glimpse of full-fledged liquidity Nov/Dec add their illiquid distortions and/or legitimate position squaring.  We could go on...  Mid-October is one of the 4 "earnings seasons," which can always add volatility.  This often lines up with new corporate bond issuance as well (which we know is something that can put pressure on bonds in general).  October 15th is the 2nd tax deadline, which can see a small glut of new money entering the managed fund sector.  As money managers allocate that capital, it can create volatility in either stocks or bonds depending on investor preferences.  Finally, it's the month for peak election uncertainty every 4 years. This particular October, there are extra layers of uncertainty due to covid, the changing landscape of the presidential debate, the still-fresh memory of 2016 reminding investors not to trust the polls, record corporate debt issuance, record Treasury issuance (and rising), record MBS and mortgage rate spreads, record mortgage origination volume relative to the industry's capacity, hot and heavy fiscal stimulus drama, and probably 17 other things I'm neglecting to mention.   If we had to pick one flashpoint from the list above that's most likely to have the biggest impact on the bond market in the short term, it would probably be the timing and size of the fiscal stimulus package that will undoubtedly arrive in one form or another by and by.  It was the primary motivation for the big jump at the beginning of the week and indecision surround stimulus was behind several of the bigger moves that kept bonds in this narrow range during the week. In the slightly bigger picture, remaining under 0.79 keeps 10yr yields under the last major ceiling from late August.  The current visit to these levels is definitely more threatening though.  A break above 0.79 would carry additional momentum implications and force a conversation about the previous major high at 0.95--a level that's really not that hard to imagine based on the Q4 trends kicked off by October in at least 7 of the last 11 years.  0.95 is far from a foregone conclusion though.  It really depends on how things go down in the coming days/weeks.  For instance, the harder it is for congress to furnish a decent stimulus bill, the better it would be for bonds.  Indeed that is the buzz that's helping the bond market hold its ground so far today.  The biggest risk this afternoon would be upbeat stimulus headlines that convey prospects for the passing of a pre-election package.

October 9, 2020 Download our Mobile App: Download our Mobile App: 30 Yr. Fixed 6.25% -0.04%   6.11% 7.26% 15 Yr. Fixed 5.71% -0.01%   5.54% 6.59% 30 Yr. Jumbo 6.25% +0.00%   6.25% 7.45% Compare Mortgage Rates from Local Lenders for Oct 9, 2020 Rates Remain Steady as Market Volatility Dies Down Thu, Oct 8, 2020 3:53PM After rising at a medium-quick pace to begin the week, the past 3 days have been much calmer by comparison for mortgage rates . Today was the best example of that stability with the average lender effectively unchanged from yesterday's latest levels. In addition, there were fewer mid-day price changes among lenders than on any of the other days this week. This isn't a huge surprise considering the lack of actionable info on tap, both in terms of economic data and headline news. The market already had a chance to react to stimulus-related dust-ups over the past few days. By the time Trump's upb... (read more) Mortgage News Daily Rate Change Points 30 Yr. Fixed 6.25% -0.04 0.00 15 Yr. Fixed 5.71% -0.01 0.00 30 Yr. FHA 5.99% -0.01 0.00 30 Yr. Jumbo 6.25% 0.00 0.00 7/6 SOFR ARM 5.64% -0.01 0.00 30 Yr. VA 6.01% 0.00 0.00 Updates Daily - Last Update: 9/15 Freddie Mac Rate Change Points 30 Yr. Fixed 6.35% -0.15 0.00 15 Yr. Fixed 5.50% -0.10 0.00 Updates Weekly - Last Update: 9/11 Mortgage Bankers Assoc. 30 Yr. Fixed 6.49% -0.15 0.56 15 Yr. Fixed 5.70% -0.14 0.55 30 Yr. Jumbo 6.44% -0.14 0.48 Updates Weekly - Last Update: 9/10 UMBS 30YR 5.5 101.30 +0.00   97.47 101.61 UMBS 30YR 6.0 102.46 +0.01   99.66 102.50 10 YR Treasury 4.035 -0.005   3.621 4.780 MBS Live Day Ahead: Anything Can Happen in Mid-October Fri, Oct 9, 2020 10:19AM At one point in time (and perhaps to this day) if you'd asked the average bond market watcher to name the top 3 months for volatility, October would definitely have made the list.  There are several potential reasons for that--the biggest one being that for more than a decade, bonds have been far more likely to rally for a few months at some point ... (read more) MBS Price Change UMBS 5.0 99.92 +0.01 UMBS 5.5 101.30 +0.00 UMBS 6.0 102.46 +0.01 GNMA 5.0 100.22 -0.02 GNMA 5.5 101.26 +0.03 GNMA 6.0 102.02 +0.03 Pricing as of: 9/16 2:19AM EST US Treasury Yield Change 2 YR Treasury 3.536 -0.001 5 YR Treasury 3.603 +0.003 7 YR Treasury 3.786 -0.006 10 YR Treasury 4.034 -0.007 30 YR Treasury 4.653 -0.008 Pricing as of: 9/16 2:19AM EST Other News Forbearances Experience Record Decline as Initial Plans Expire Fri, Oct 9, 2020 10:05AM The number of forbearance plans plunged last week as those that went into effect in the early days of the pandemic hit the end of their initial six-month terms. Black Knight said nearly one-fifth of the plans ended, as the number fell by 649,000 mortgages or 18 percent of the previous week's total. A total of 2.97 loans remain in forbearance. It was the larg... (read more) Consumers Remain Confident About Job Prospects Thu, Oct 8, 2020 9:59AM Fannie Mae's Home Purchase Sentiment Index (HPSI) continued to rebound from its spring slide , rising for the second straight month. The HPSI, based on a subset of six questions from the company's monthly National Housing Survey, shows increased optimism about home selling conditions, home price growth and the labor market but that optimism didn't carry forw... (read more) Refi Application Volume Recovers From Last Week's Loss Wed, Oct 7, 2020 8:41AM The Mortgage Bankers Association (MBA) said the volume of purchase mortgage applications declined for a second week but refinancing more than recovered from last week's 7 percent loss. MBA's Market Composite Index, a measure of mortgage loan application volume, increased 4.6 percent on a seasonally adjusted basis during the week ended October 2 and was 5 per... (read more) Real Estate Agent, Pooling, CRM, Processing Tools; Galton Funding Sold; CFPB, RESPA, MSA News Fri, Oct 9, 2020 8:51AM Eddie Van Halen advised, “You only have twelve notes. Do what you want with them.” Twelve is probably the number of undecided voters in the U.S. at this point. Political analysts and rumor mongers, besides wondering why Ivanka Trump, Jared Kushner, and Bill Barr have slid out of the public eye, suggest that President Trump has created an unpreced... (read more) Latest Video Trump raises stimulus offer to $1.8 trillion KBW CEO: Economic recovery is at 80% of pre-Covid levels Wholesale inventories rise 0.4% versus 0.5% expected Covid-19 mortgage bailouts see largest fall as first wave of forbearance pl... Around the Web Calculated Risk Blog U.S. Heavy Truck Sales down 26% Year-over-year in September NAHB Eye on Housing Mortgage-Treasury Spread Trended Lower in September CNBC Trump raises coronavirus stimulus offer to $1.8 trillion, sources say Calculated Risk Blog Q3 GDP Forecasts news.google.com SBA clarifies deferral period for PPP loan payments CNBC Mitch McConnell says a coronavirus stimulus package is 'unlikely in the next three weeks' CNBC Central banks are weighing their own digital currencies this is what they could look like Reuters 'Treasuries on steroids': U.S. banks' mortgage bond trading bonanza CNBC Coronavirus mortgage bailouts fall below 3 million in pandemic's sharpest decline CNBC Red hot home prices have more consumers saying now is a bad time to buy Calculated Risk Blog Seattle Real Estate in September: Sales up 59% YoY, Inventory UP 8% YoY NAHB Eye on Housing Consumer Credit Decreases in August Calculated Risk Blog AAR: September Rail Carloads down 9.7% YoY, Intermodal Up 7.1% YoY

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