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Tough Afternoon For Lock vs Float Decisions

Tough Afternoon For Lock vs Float Decisions Even yesterday, we were already trying to reconcile the size of the bond rally relative to the underlying motivations.  Then the rally picked up steam this morning despite a lack of truly compelling justifications in the economic data.  While there are ways to explain the apparently outsized rally, it is certainly bigger than it needs to be ahead of the jobs report.  That begs the question: does the market see/know/feel something that suggests a big picture corner has been turned?  All we can really know is that the entirety of the past 3 weeks offer the most compelling potential top we’ve seen in rates since late 2022.  That could be because a top is taking shape or simply because this is the most convincing trap yet.  It’s not overly dramatic to say that the jobs report will cast a vote on the “realness” of this rally (if it falls far enough from forecast) and the result will be rates that are quite different than Thursday’s, for better or worse. Econ Data / Events Jobless Claims 217k vs 210k Continued Claims 1.818k vs 1.8k f’cast, 1.783k prev Labor Costs Q3 -0.8 vs 0.7 f’cast, 3.2 prev Market Movement Recap 08:52 AM Stronger overnight with additional gains after data.  10yr down 10.2bps at 4.632.  MBS up half a point. 12:02 PM Off the morning’s best levels, but still stronger.  10yr down 6.5bps at 4.669.  MBS up 3/8ths 01:13 PM Weakest levels of the day.  10yr down 3.7bps at 4.697.  MBS still up on the day, but down about a quarter point from highs. 03:19 PM Off the weakest levels and fairly flat in the PM.  MBS up just over a quarter point.  10yr down 6.2bps at 4.672.

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