This is Matt Graham with the MBS Live Market Update. My, oh my, what an interesting and crazy week for the bond market, and it’s off to a crazy start this week as well. Last week kicked off with yields near the lowest levels in several months, and we proceeded to rally all the way down to under 4% in 10 year treasury yields as of Friday and then we bounced back. What drove all of that? Normally we’d be talking about things like economic data, and while that did have some impact here and there, it’s really been reactions to tariffs and trade policy that have driven most of the volatility as has been and continues to be the case. There is greater than normal amount of correlation between stocks and bonds in a risk off pattern. A risk on pattern, and that simply involves stock prices and bond yields moving in the same direction roughly at about the same time. It’s not a perfect one-to-one relationship in terms of all of the highs and the lows matching up, but at many times over the past few weeks. We’ve seen big swoons in the stock market correlate with big rallies in bonds, and then big reversals in stocks correlate with big reversals in bond yields moving higher. Friday’s jobs report ended up roughly falling on deaf ears, and that’s interesting, considering it was quite a bit stronger than expected. Nonetheless, some traders could point to that and say that was one underlying reason that bonds ended up. Moving into Uighur territory on Friday, even though stocks continued to fall. So, that was probably the most notable departure in that risk off trading pattern of the week. I wouldn’t personally give all the credit to the jobs report. We also need to talk about things like the treasury auction cycle coming up this week. The fact that it was a Friday on a week where bonds had made huge moves and when those things coincide, it’s not uncommon to see a traders sort of circle the wagons and push back against the week’s prevailing trend on a Friday. Now, over the weekend, there was a little bit of support for that notion because right outta the gate in the overnight session, we had bonds rally back to near the lowest levels on Friday and it wasn’t until the start of the European session that we began losing ground so far this week. The general theme of that weakness as the new week begins has been one of concessions and negotiation regarding tariffs. Several countries have come out saying they’re willing to negotiate. Even the EU says it would like to entertain a 040. Tariff policy on industrial goods with the us. These are things that hurt bonds and help stocks because the opposite was true when the news rolled out in the other direction. In other words, when it looked like there were going to be high tariffs between. Trading partners, stocks and bond yields moved lower together. So reversing that news is leading to a reversal in the market movement. The craziest event so far of the new week was a headline that made it through to newswires, both on Bloomberg and Reuters. Saying that Trump was entertaining a 90 day pause on the tariff rollout that was debunked fairly quickly, but not before it sent shockwaves through financial markets causing 10 year yields to spike instantly from 4.07. All the way up to 4.18 plus. So more than a 10 BIP spike in treasury yields for a fake headline, and it wasn’t entirely fake because it did draw on some things that were actually said, not by Trump, but questions or recommendations from investors. I believe it was Bill Ackman who said that the president should consider a 90 day pause, and then Hassett was asked on a talk show if that’s something that could be considered, and he didn’t answer directly, but he certainly didn’t say that Trump was considering it and then for whatever reason, maybe somebody wanted to make a lot of money on the volatility, somebody convinced the Newswire aggregators to post this Newswire, and the rest is history. It was posted, markets reacted, and then almost instantly moved back in the other direction. Bond yields remain elevated, not as elevated as they were, but we’ve simply been trending toward higher levels all morning. There’s also a notion of a legal challenge potentially being presented to the tariff rollout, but not. Much has come of that so far in terms of news wires and yeah, we’re basically at the whim of tariff and trade headlines as the week continues. Yes, we do have a treasury auction cycle. Yes, we do have CPI and PPI, that economic data is no doubt important and it can certainly set the tone in the second half of the week if it falls far enough from forecast. If it is just on par with the jobs report or other relatively important economic data, then it runs the risk of being overshadowed by any significant updates on tariffs and trade. 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.