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Snowball Rally For Bonds! Why? And What Next?
Heading into today, we expected the bond market to ignore potentially stronger Retail Sales data. Not only did bonds overlook the big beat (9.8 vs 5.9 f'cast), but they actually rallied in response. This was made all the more remarkable by the presence of 3 other better-than-expected economic reports that came out at the same time. Bonds went on to experience a full-fledged snowball rally. In today's huddle, we'll talk about what that means, what's behind it, and what might be next.
Econ Data / Events
Fed MBS Buying 10am, 1130am, 1pm
Retail Sales 9.8 vs 5.9 f'cast, -2.7 prev
Jobless Claims 576k vs 700k f'cast, 769 prev
Empire State Manufacturing 26.3 vs 19.5 f'cast
Philly Fed 50.2 vs 42.0 f'cast, 51.8 prev
Industrial Production 1.4 vs 2.8 f'cast -2.6 prev
NAHB Builder Confidence 83 vs 83 f'cast
Market Movement Recap
08:45 AM Bonds were modestly stronger overnight and are now much stronger (paradoxically) following a quadfecta of upbeat economic data. 10yr yields down 3.5bps at 1.599%. 2.5 UMBS up an eighth at 103.41.
10:22 AM Rally accelerated after breaking 1.585 technical level. 10yr is currently down 6bps at 1.574. MBS are underperforming (normal, considering circumstances) with 2.5 coupons up just shy of a quarter point on the day. No new news. This is all momentum and tradeflows at this point.
12:30 PM More technical follow-through with some help from as-expected Treasury auction sizes (5yr TIPS and 20yr bonds). But it's mostly a technical/momentum move based on the break of 1.62 and 1.585. Yields are at the lows of the day now (1.55%). MBS are underperforming, but still doing great (up 31 bps / 10 ticks).
02:26 PM Rally is in full turbo mode with 10yr yields down 10 bps at 1.53+. UMBS 2.5 coupons up 3/8ths. No new news. All momentum/technicals.
MBS Commentary
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Snowball Rally For Bonds! Why? And What Next?
Heading into today, we expected the bond market to ignore potentially stronger Retail Sales data. Not only did bonds overlook the big beat (9.8 vs 5.9 f'c... (read more)
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Housing News
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New home builders seem to be slowly getting their mojo back. After recovering from the hit they took in the first days of the pandemic, they encountered labor shortages, supply chain issues, and rising material costs. The National Association of Home... (read more)
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Rob Chrisman
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There are some clever people out there, especially when it comes to satisfying demand . Lenders know that mortgage pricing is a function of supply and demand. If one investor doesn’t want your non-owner loans, for example, some other investor w... (read more)
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Housing News
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Freddie Mac's Economic and Housing Research Group finds a lot to like in the present economic environment. . The company's quarterly forecast credits the increasing availability of COVID-19 vaccines and the easing of virus related restrictions, the p... (read more)
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Housing News
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Black Knight has launched a new monthly report covering mortgage origination activity as gathered through its Optimal Blue loan product and pricing engine. The company says its Originations Market Monitor will publish a series of key indicators drawn... (read more)
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Mortgage Rate Watch
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Slow and steady wins the race, and mortgage rates have been making slow, steady progress back down from recent long-term highs seen at the end of March. Over that time, the average conventional 30yr fixed rate quote has fallen anywhere from .125 to 0... (read more)
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