Over Before it Began

Monday proved to be a boring trading day despite the moderately big sell-off. Yields actually didn’t move much during the domestic session. In fact, they didn’t move during the overnight session either. Because the day’s market-moving news happened on Sunday before trading began, it was instantly priced in at the open, and the rest of the day was spent drifting sideways to slightly weaker. Bonds ultimately underperformed their prevailing correlation with oil prices. We’re not reading anything into this–especially in light of the Treasury auction cycle possibly adding some concessionary weakness. 

Econ Data / Events

Existing home sales (Apr)

4.02M vs 4.05M f’cast, 3.98M prev

Market Movement Recap

09:03 AM Weaker overnight after peace deal impasse. MBS down a quarter point and 10yr up 2.6bps at 4.381

12:58 PM weakest levels with 10yr up 4.6bps at 4.401 and MBS down almost 3/8ths

02:08 PM some support after hitting weakest levels. MBS down 11 ticks (.34) and 10yr up 4.8bps at 4.403

Bonds are starting the day moderately weaker. The reasons are straightforward. Chief among them, Trump rejected Iran’s counterproposal to end the war, calling it “totally unacceptable.” In response, Iran’s foreign minister said it will never bow to foreign pressure. Adding fuel to the fire, Netanyahu said the war was not over and there was “more work to be done.”  When trading began late Sunday night, oil prices were roughly 5bps higher and 10yr yields rose 4bps to roughly 4.40%. Despite those losses, trading levels for both oil prices and bond yields remain lower than they were before last week’s big rally on Wednesday morning.

The Federal Reserve’s April financial stability report found that asset valuations remain elevated, even as investors are beginning to demand more compensation for risk amid rising uncertainty around monetary policy.

First American claims Liberty National’s owner changed the company’s name immediately after a judge held her firm liable for an erroneous wire transfer.

The opinion that supports national banks’ ability to avoid paying interest on certain mortgage accounts in New York is unlikely to be the last word.

Alongside its cloud-based brokerage, the company said the acquisition will transform eXp’s existing infrastructure into a multi-model platform.

Lender and servicer Loandepot, reeling from a larger loss in the first quarter, could use the potential funds to cover daily operations or repay debt.

The latest offer, 70 cents per share higher than previously agreed to, equals the cash proposal made by UWM Holdings to win over Two Harbors’ shareholders.

It ended up being a decent round trip for rates this week. Monday kicked things off with a jump to the highest level in more than a month, and the third highest since August 2025. But that ended up being the only day where rates went higher.  Wednesday brough the biggest chunk of the recovery with MND’s daily rate index dropping 0.10%.  Tuesday and Friday (today) each added a 0.02% drop, taking the index to 6.42% after ending last week at 6.44%. War-related headlines were less of a factor today and volatility was unsurprisingly lighter as a result. This is an adjustment for seasoned rate watchers who are used to monthly jobs report being a distinct source of volatility. It’s especially notable that the job count came in significantly higher with no ill effect on bonds/rates. Over the past 6 months, markets have shifted their jobs report focus from the payroll count to the unemployment rate, reversing decades of precedent. Today’s outcome is more logical in that context as the unemployment rate was right in line with expectations at 4.3%.

Calm and Slightly Stronger, But Volatility Will be Back

Once or twice per week, the bond market manages to post a fairly calm trading day against the prevailing backdrop of generally higher volatility. Today was such a day. The most helpful catalyst was an absence of any major war-related headlines and associated oil price volatility. That said, it’s a near certainty that war-related volatility will be back in the coming week. 

Econ Data / Events

Average earnings mm (Apr)

0.2% vs 0.3% f’cast, 0.2% prev

Non Farm Payrolls (Apr)

115K vs 62K f’cast, 178K prev

Participation Rate (Apr)

61.8% vs — f’cast, 61.9% prev

Unemployment rate mm (Apr)

4.3% vs 4.3% f’cast, 4.3% prev

Consumer Sentiment (May)

48.2 vs 49.5 f’cast, 49.8 prev

Sentiment: 1y Inflation (May)

4.5% vs — f’cast, 4.7% prev

Sentiment: 5y Inflation (May)

3.4% vs — f’cast, 3.5% prev

Market Movement Recap

08:32 AM No major reaction to jobs report. MBS up 2 ticks (.06) and 10yr down 1.5bps at 4.375

10:46 AM Slightly stronger but leveling off.  MBS up 6 ticks (.19) and 10yr down 3.6bps at 4.356

02:13 PM MBS up 5 ticks (.16) and 10yr down 3.5bps at 4.356