MBS MARKET COMMENTARY

MCT’s Director of Analytics, Bill Berliner, writes a weekly summary of movements in the secondary market. The analysis includes an in-depth view of treasury yields, mortgage backed securities, note rates and more. Visit this MBS market commentary page every Monday for an updated market outlook. To receive the MBS daily commentary or the MBS weekly market commentary in your inbox, join our newsletter.

MBS Weekly Market Commentary Week Ending 8/2/19

Treasury rates plunged last week after the announcement of a cut in the Fed Funds target rate on Wednesday was followed by an escalation of the trade fight between the U.S. and China.  While the entire Treasury curve rallied, intermediate and long Treasuries had the best performance, with yields dropping between 19 and 22.5 basis points week/week.  The rally left the 2-10 year spread at +13.4, its tightest level since last December, while the 2-5 year spread inverted again and closed the week at around -5.5 bps.  Money market rates were mixed, however, as 1-month LIBOR was virtually unchanged while SOFR (a market-based overnight rate) went from 2.41% on 7/26 to a high of 2.55% on July 31st (possibly distorted by month-end pressures) to end up at 2.19% on Friday.  Overseas rates also plunged, leaving the entire German sovereign curve (including their 30-year bond) at negative yields.

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MBS Weekly Market Commentary Week Ending 7/26/19

The Treasury market meandered around last week, although the week/week changes belied some noteworthy mid-week price volatility.  The 10-year note ended the week yielding 2.07%, only about 1.5 basis point higher than its 7/19 close, but the note’s yield ranged from a low of 2.045% to a peak of 2.082%.  The yield on the 2-year note was somewhat steadier, although it popped by about 5 basis points on Thursday, leaving the 2-10 year spread just under 2 basis points flatter at +21.7 bps.

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MBS Weekly Market Commentary Week Ending 7/19/19

Treasury yields declined last week, with the week/week change led by the intermediate and long sectors of the market.  The 10-year note closed at 2.056%, down about 7 basis points on the week, which left the 2-10 years spread at +23.5 basis points.  The drop in the 10-year yield was entirely due to a decline in the 10-year “real” yield, as the 10-year TIP declined by about 8 basis points on the week while the 10-year break-even inflation rate (i.e., the on-the-run minus the TIPS yields) increased by about 1.5 basis points.

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MBS Weekly Market Commentary Week Ending 7/12/19

Treasury yields mostly rose last week, although the front end of the yield curve rallied modestly after fairly dovish testimony from Fed Chairman Powell.  While the 10-year yield rose by almost 9 basis points to close the week at 2.12%, the yield on the 2-year note actually declined by 1.5 bps.  This left the 2-10 year spread wide by 10 basis points week/week after moving inside +16 bps last Tuesday, before a selloff in the intermediate and long end of the curve later in the week.

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MBS Weekly Market Commentary Week Ending 6/28/19

Intermediate and long-maturity Treasuries continued to rally last week, leaving the yield on the 10-year right at the 2% mark. The rally mainly benefitted maturities longer than seven years, as the 2-year yield only declined by a basis point (versus 5 bps on 10s) which left the 2-10 year spread at +25 bps. The rally incorporated both a lower TIPS break-even inflation rate (with the 10-year B/E ending the week at 1.7%, about 3.5 bps lower) while the TIPS yield itself (a proxy for a “real” 10-year rate) declined by about 2 bps to 0.30%.

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MBS Weekly Market Commentary Week Ending 6/21/19

Bonds continued their rally last week, although the 10-year failed at an initial attempt to break through 2%, closing at 2.056%. The rally was triggered by dovish statements from the Fed’s Open Market Committee that led traders to conclude that a rate cut is almost certain at the 7/31 meeting. (The Fed Funds futures market currently projects at least two rate cuts this year.)  The Treasury yield curve (2-10s) ended the week steeper by about 6 basis points, while the 2-5 spread widened by 3 bps to close at +2 bps.  Overseas rates also followed Treasuries lower, with the German 10-year ending the week at -0.29%.

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MBS Weekly Market Commentary Week Ending 6/14/19

Treasury yields did not change much last week, despite some volatility that briefly took the 10-year yield to 2.15% before closing at 2.08%. The yield curve configuration was also little changed, with the 2-10 year spread moving out by about ½ basis point while 2-5s inverted by a basis point and the 5-30 spread widened by about 3 bps. The TIPS (inflation-protected) break-even rates, which serve as proxies for expected inflation, declined noticeably last week, with the 5-year break-even contracting by 14 basis points despite a slight uptick in the CPI.

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MBS Weekly Market Commentary Week Ending 5/31/19

A lot has changed since our last update in mid-May. The 10-year Treasury yield closed on Friday at 2.125%, 27 basis points lower than its close on 5/17 and more than 110 bps lower than at the cycle highs in early November. View MBS Weekly Market Profile Report *The...

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MBS Weekly Market Commentary Week Ending 5/10/19

Treasuries rallied last week as the U.S.-China relationship deteriorated amid a breakdown in trade talks. The 10-year Treasury closed just over the 2.45% level, with the rest of the curve (except the 30-year bond) moving pretty much in concert.

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