“Exploration of Market Fluctuations: Mortgage News Daily Recap, February 23, 2024”

Friday turned out to be an unexpectedly robust day for the bond market, with the most impressive rally of the week occurring at the long end of the yield curve. The surge was influenced in part by early trading in European bonds, but was likely given an extra lift by the quarterly rollover in Treasury futures. The losses the 10-year Treasuries sustained on Wednesday and Thursday were entirely offset, though these initial losses had been on track to breach the 4.32% technical ceiling. As a result, Friday’s rally is most adequately described as maintaining the broader pattern of lateral movement.

Summary of Market Developments

10:01 AM: The market was slightly stronger overnight, with gains continuing into early trading. Mortgage-backed securities (MBS) increased by 6 ticks (.19), and the 10-year yield dropped by 3.4 bps to 4.297.

01:35 PM: The market saw consistent gains throughout the morning. Federal Reserve comments did not have a negative impact. The 10-year yield further declined by 8.5 bps to 4.246, and the MBS increased by 3/8ths.

03:16 PM: The market stabilized near peak levels, with MBS nearly up by 3/8ths and the 10-year yield dropping by 7.1 bps to 4.26.

“Revealing Insights: A Review on Bond Market Sharp Moves and MBS RECAP for February 22, 2024”

Continued Momentum in the Drift

Despite the recent Jobless Claims data suggesting a more robust picture than anticipated, the bond market revealed only a minimal impact. This comes even though the reference period for this data coincides with the up-and-coming NFP number. Instead, market participants showed a greater concern towards the decline in price pressures reported in the S&P PMI data, hinting at a level of inclination towards other secondary data that might present an alternative perspective to the latest CPI. However, this depends on the data’s initial favorability. Still, even with favorable data, the market must wait for at least a week for the first potential indicator (PCE), followed by another week for any high-tier data. As a result, bonds remain on a drifting trajectory, and not the enjoyable type.

Economic Data / Incidents

Unemployment Claims:
201k compared to a forecast of 218k, previous figures stand at 213k

Ongoing Claims:
1862k compared to a forecast of 1885k

S&P Services PMI:
51.3 compared to 52.0 forecasted
Notably, “the increase in input prices was the slowest since October 2020”

Summary recap of Market Activity

08:45 AM – After a slight slump overnight, a swift sell-off occurred following the Claims data. However, recovery appears to be on the horizon. 10yr now up by only 1bp at 4.329, with MBS falling by an eighth.

09:57 AM – The market bounces back into the green following PMI data. MBS increased by 2 ticks (.06), with 10yr decreasing by 1.2bps at 4.307.

12:29 PM – Ambiguous market movements, with a return to a weaker positioning. The 10yr is up by 1.2bps at 4.331, and MBS down by 1 tick (.03).

02:39 PM – Market remains relatively steady, with a minor MBS drop of 1 tick (.03). Meanwhile, 10yr rises by less than 1bp at 4.327.

“Inside the Mortgage Market: An Exceptional Day of New Developments – A Recap of February 22, 2024”

Current rates depend on data, primarily the Consumer Price Index (CPI) and the significant job reports. However, these aren’t scheduled for release today; instead, we have a suggestive clue regarding potential employment trends from the weekly unemployment claims data. This usually overlooked data becomes significant, particularly when considering the report that includes data from the 12th of the month. The job reports (BLS Employment Situation / nonfarm payrolls) utilize data gathered during this period. With this perspective, the bond market effectively disregarded a better-than-expected result this morning, gaining comfort from the S&P PMI data released an hour later. Despite a slight uptick, bond yields are subtly increasing as the afternoon approaches, for unknown reasons.

This upward trend is happening at critical levels, leading some experts to perceive this as a failure to find support at the 4.32% marker. Nevertheless, it’s premature and unclear in the broader context to declare any conclusions.

“Understanding the Complexities of MBS Market Dynamics: A Recap of Current Trends”

The beginning of the week saw bond markets open sluggishly, even though this week has fewer business days. In Asia, yields initially started a little higher but managed to return back to ‘neutral’ just as U.S. trading began, eventually shifting to slightly stronger levels at the time of European trading closure. The later half of trading in the U.S was dominated by a stronger selling sentiment, but this wasn’t significant enough to place bonds in a weaker position by the 3pm CME closure. Notably, this all transpired within a tight enough bandwidth to discount any deep analysis.

Snapshot of Market Fluctuations

At 09:59 AM, a gradual rise had been observed overnight and during U.S. trading hours. The 10-year yield was down by 2.5 basis points at 4.256. MBS showed an increase by 3 ticks (.09).

By 11:43 AM, the market continued to display modest improvements with MBS improving an additional 6 ticks (.19) and the 10 year yield dropping slightly to 4.252.

By 02:55 PM, the weakest levels of the day were recorded, but overall, it remained slightly in the positive territory. MBS were again up by 3 ticks (.09) and the 10-year yield decreased by half a basis point at 4.275.

By 03:42 PM, there was no significant movement either way and MBS continued to be up by 3 ticks (.09). The 10-year yield finally settled down 1 basis point at 4.271.

“Deciphering Today’s Mortgage Backed Securities Market: An Analysis of Events and Trends – February 20, 2024”

Towards the end of 2023, bonds were clearly on a defined path, but experienced a minor, sensible adjustment at the start of 2024. With respect to 10-year yields, the adjustment apparently concluded after stopping at a peak of 4.19%. However, data from the previous week extended this range by over 10 basis points. Presently, the market seems to be guided by “data dependence”. So, in a situation void of new data, the only option is to patiently await new developments.

Significant data is notably missing in this shortened festive week. The only attention-grabbing event on the calendar is the release of the Federal Reserve’s minutes on Wednesday. However, it’s unclear what new information could be revealed that hasn’t been previously covered in recent addresses. In light of this, unless new unexpected factors emerge, the only option is to keep an eye on the range limits overhead while patiently awaiting new developments.

On a technical note, one could consider whether the 10-year yield’s ceiling of 4.32% will be breached before the two week upward trend (represented by the yellow line in the graph) as a way to pass the time. While the predictions are far from precise, they could provide some insight into the possible direction of a breakout. Ideally, you would want the yield to break below the yellow line if you prefer not to see a rise in rates.

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