[Matt] This is Matt Graham with the MBS live market update bonds had a fairly rough week last week, even though there were no major market movers in terms of the economic calendar, the week got off to a rocky start on Monday morning with European markets moving higher in yield. But even if we factor out the European influence, there was A lot of selling pressure left in the domestic session. That was one of the two or three occasions we see every year where we had a fairly big amount of market movement without universal agreement on what the motivation was in the days that followed. The average analyst seemed to be landing on some combination, of election odds and trader positioning. The trader positioning thing is something that we often talk about when we can't figure out what else to talk about. Dirty little secret of the bond analysis game. And it's hard to actually do a real time poll of different traders positions and how they're executing those to contribute to volume and volatility on any given day. It's the sort of thing that a market watcher may be able to intuitively come to a conclusion about, but nothing that is super conclusive. On the other hand, the other type of poll that has been done is election polling. And also the betting markets have been a source of inspiration for the bond market when it comes to the elections impact on the bond market. There's really no telling how the rate reaction would play out in the longterm, but over shorter time horizons, traders have tended to associate higher treasury yields, higher rates with better odds of a Trump victory, not necessarily because it's a Trump victory, but because it would be. One party sweep of Congress and the Oval Office, which is the sort of thing that tends to push rates higher, whether it is a red sweep or a blue sweep. As for the week ahead, the volatility that we may see in the coming days dwarfs any volatility that we saw last week. This has to do with an active slate of big ticket economic data culminating in Friday's very important jobs report. The last two jobs reports have created massive movement in the bond market for better and worse. First, it was better than it was worse. Now this jobs report isn't in position to vote. On which of the previous two jobs reports was more in line with the labor market reality. Keep in mind that traders are taking the payroll count with a grain of salt this time around because of hurricane related distortions. The unemployment rate may carry more weight than it normally does. Other days of the week have significant reports every day except for Monday. And even Monday, we have the treasury quarterly refunding announcement estimates coming out at 3 PM. They also have a treasury auction at 1 PM earlier in the week than we normally would see that. So there are plenty of reasons for bonds to sell first and ask questions later, depending on the outcome of the election and economic data next week, of course, is the election and also the next fed announcement. So the potential for volatility really can't be overstated here. It wouldn't be. Any more or less of a surprise to see mortgage rates at 8 percent or 6 percent in a couple of weeks from now, with a lot of that momentum being created at some point in the next five to six business days, that's going to do it for this week. Back to you.
Matt Graham, Founder and CEO, MBS Live
Matt began as an originator in 2002. He fell in love with the idea of following MBS in real-time but felt that existing products were only scratching the surface. Thus was born MBS Live in 2007, the first-of-its-kind platform with real-time market data/analysis, and live chat with analysts, traders, and originators around the country. He is currently the Founder and CEO of MBSLive!
He's been covering bond/mortgage markets, writing commentary, alerts, and chatting with the live community every business hour of every business day ever since.
Matt also serves as the Chief of Operations for mortgagenewsdaily.com, where he is one of the industry's most respected mortgage rate experts, frequently quoted in the media. Mortgage News Daily's rate index is used as the definitive resource on day-to-day mortgage rate averages.
He lives in the Pacific Northwest with his wife and son where he enjoys skiing, fishing, coaching youth sports, playing the guitar, and more DIY projects/hobbies than he'd care to admit.