Bonds finally weakened a bit today after 2 nice post-election rally days.  There are a few potential reasons for that, and they’re discussed in detail in today’s huddle video.  The most interesting consideration, however, concerns the Fed and the POSITIVE havoc they’ve been wreaking on the MBS market (havoc they might soon take note of… and do something about).

Market Movement Recap

08:18 AM

Bonds were flat to slightly weaker throughout the overnight session and began losing ground heading into early domestic hours.  The level of weakness is inconsequential in the bigger picture, although a break well above .79 would speak to more serious selling pressure.  We’re currently less than a bp away from that.  2.0 UMBS are down an eighth so far at 103-21 (103.66).

08:46 AM

Slightly weaker after NFP, largely a reaction to the big drop in unemployment with no concomitant drop in the participation rate (actually higher by 0.3).  10yr yields rose a quick 2bps, but are trying to hold under 0.8.  In light of that ground-holding, MBS have been surprisingly resilient.  That could change if 10s make a bigger move over 0.80.

09:10 AM

Another pop in Treasuries after PA vote count flips in favor of Biden.  Algorithm-based trades have been triggered on the technical breakout above 0.8% in 10yr yields.  Now up 6bps on the day to .83%.  MBS are finally starting to comply (by selling more).  Fasten seatbelt sign has been illuminated.

12:43 PM

Losses continued into the 10am hour, but bonds bounced and recovered a bit since then.  The only real positive anecdote from a cause/effect standpoint was a McConnell comment about less stimulus being needed based on recent econ data (stimulus has been bad for rates).  MBS are down .19 (6 ticks) on the day at 103-18 (103.56) after being as low as 103.47 (103-15) earlier.

03:34 PM

Finally seeing enough stability to talk about it.  MBS are now down only 3 ticks (0.09) on the day and 10yr yields have leveled off in a tight range just over 5bps higher on the day at .82%.  No major new market movers in play this afternoon.

MBS Pricing Snapshot

Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.


UMBS 2.0

103-22 : -0-03


10 YR

0.8201 : +0.0421

Pricing as of 11/6/20 5:33PMEST

Today’s Reprice Alerts and Updates

10:28AM  :  ALERT ISSUED: Negative Reprice Risk Increasing

9:05AM  :  ALERT ISSUED: Additional Bond Weakness After PA Vote Count Flips Biden

8:35AM  :  ALERT ISSUED: Bonds Losing Some Ground After Stronger Jobs Data

Economic Calendar

Time Event Period Actual Forecast Prior
Friday, Nov 06
8:30 Non-farm payrolls (k)* Oct 638 600 661
8:30 Unemployment rate mm (%)* Oct 6.9 7.7 7.9
10:00 Wholesale inventories mm (%) Sep 0.4 -0.1 -0.1

By Matthew Graham , dated 2020-11-06 17:35:18

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Courtesy of Mortgage News Daily

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