Knock Knock Knockin’ on 10yr Floor

Sometimes, it’s a shame that the 7yr Treasury isn’t the most popular bond market benchmark. If it were, today’s headline could reference “knockin’ on 7’s floor.” Whether it’s the 3.77 level in the 7yr Treasury yield or 4.0% in the 10yr, bonds are repeatedly approaching these “floor” levels over the past 2 weeks and today’s installment was the best yet–even if only barely.  Yet again, there’s not much for the bond market to hang its hat on in terms of motivations this week if not for the general stock market malaise. Apart from that, one would have to venture a guess that bond traders are discounting economic fallout from trade/geopolitical uncertainty, but there’s no objective way to measure those vibes in the short term. 

Econ Data / Events

Continued Claims (Feb)/14

1,833K vs 1860K f’cast, 1869K prev

Jobless Claims (Feb)/21

212K vs 215K f’cast, 206K prev

Market Movement Recap

08:36 AM Choppy and sideways overnight, but in a narrow range. MBS up 2 ticks (.06) and 10yr down 0.7bps at 4.039

01:10 PM MBS up an eighth and 10yr down 2.6bps at 4.019

02:21 PM MBS up 2 ticks (.06) and 10yr down 2.1bps at 4.024

03:52 PM best levels of the day with MBS up an eighth and 10yr down 3.4bps at 4.01

This is the problem with narrow trading ranges. Yesterday, yields were safely inside a narrow range near long-term lows. Today, they’re challenging the lowest levels since November. Any time we’re at the best levels in months, it’s normal to want to know why, but because of the narrow range, there isn’t really a new “why” for today’s share of the move. After all, 10yr yields are down less than 3bps, which is a below average move in the big picture. We can’t blame data as there isn’t a compelling option there. If we’re still desperate for a scapegoat, it may not be perfect, but there is enough correlation with the stock market’s struggle to make new highs that we can at least consider it.
Today’s chart shows how stocks have slipped from all-time highs and how bonds have benefited with every instance of significant slippage.

The 2nd chart is just for bigger picture perspective. 

Total consumer debt in the United States hit $18.2 trillion by the end of last year, with $12.8 trillion attributed to first mortgages, according to Equifax.

The lender announced a partnership with Framework Ventures that aims to provide $500 million in credit through an integration into the Sky stablecoin ecosystem.

Aulene Wessel also previously worked in the fintech sector, and will be heading up accounting in her new post at the nonbank mortgage lender and servicer.

For five of the six private mortgage insurers, the surge of originations during the fourth quarter led to more new business versus the prior three months.

The merger adds strengths of Direct Mortgage’s conventional and government segments to the Lendermac platform, supporting the latter’s growth ambitions.

In-Range PM Weakness

Viewed under a microscope, it may have seemed like today was a relatively volatile session for the bond market.  Weaker opening levels in Treasuries gave way to a mid-day rally that nearly got rates back to unchanged levels. But the afternoon saw steady selling that took bonds to their weakest levels of the session. In the bigger picture, this was a non-event as it leaves trading levels well within the prevailing range. Additionally, there were no compelling justifications for the move unless we want to continue to force the narrative of higher stocks prices leading to higher bond yields (where the correlation has been anything but reliable).

Econ Data / Events

MBA Purchase Index (Feb)/20

149.7 vs — f’cast, 157.1 prev

MBA Refi Index (Feb)/20

1432.9 vs — f’cast, 1375.9 prev

Market Movement Recap

08:58 AM Steadily but modestly weaker overnight. MBS down only 1 tick (.03) and 10yr up 1.5bps at 4.05

11:31 AM MBS unchanged and 10yr up less than 1bp at 4.042

01:46 PM MBS down 1 tick (.03) and 10yr up 0.6bps at 4.041

It may not be as glamorous as being able to say mortgage rates are “in the 5s,” but at 6.00%, today’s MND rate index is a mere 0.01% higher than yesterday’s multi-year low.  For all practical purposes, this means the average borrower will see almost exactly the same rates as yesterday.  In many cases, the quotes will be exactly the same.  There were no big ticket market movers on the econ calendar and no major headlines that caused any appreciable volatility in the bond market (bonds dictate mortgage rates).  In general, the entire week is very quiet in terms of those potential market movers. Rates would need to see a shift in important economic reports before committing to their next major move. 

Some days, there’s a lot to say about what’s going on in the bond market. Other days are like today. Analysts have to lean on themes like trading ranges, technicals, and the asset allocation trade (buy stocks / sell bonds, and vice versa). Incidentally, those default explanations continue to hold some water with 10yr yields once again hesitant to push below 4.0% this week and a slow recover in stocks possibly pulling yields a bit higher.  We can also consider a bit of concessionary trading ahead of the 5yr Treasury auction (accounts abstaining from buying now because they have to buy later).