Another false alarm turns into a bond market crash

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MBS Live Recap: Another False Alarm Turns into Bond Market Crash

Thu 14 April 2022, 14:35

If the current behavior of the bond market didn’t make us cry, we would only have to laugh. Not even 24 hours after another volley of analysts and talking heads proclaimed “the top is here for rates!” 10-year yields close at the highest levels since late 2018, and mortgage rates are back in line with the awful levels seen earlier this week. The culprits are anything but easy to spot today, with the most obvious move coinciding with the NYSE open at 9:30 a.m. end of 3.5 days). There was some chatter about comments from the Fed and the ECB, but these didn’t fit the drama as well in terms of timing and volume. Illiquidity has greased the skids.

  • Buy MBS from the Fed 10 a.m., 11:30 a.m., 1 p.m.

  • Retail Sales 0.5 vs 0.6 f’cast, 0.8 prev
    Jobless claims 185 vs 171k f’cast, 167k prev

  • ECB announcement
    No rate hike (as expected)
    Schedule/amounts reduced as planned
    rate hikes will follow tapering (as expected)

09:05

Modestly stronger overnight, largely ahead of the ECB announcement. Losing ground since then with 10 years back in negative territory after being several basis points lower. MBS down 1 tick, but illiquid.

09:43

Further weakness after the NYSE opens at 9:30 am (more focused on US trading than European trading). 10-year up 4.5 basis points at 2.747 and MBS down 6 ticks (0.19) at 100-15 (100.47)

11:37

More time, more sales. New MBS lows, down half a point on the day. 10-year yields rose nearly 10 basis points to 2.799. No separate individual market engine.


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