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.

View the MBS Market Profile Descriptions and Definitions for a detailed explanation of the weekly report then join our newsletter to receive the MBS weekly market commentary in your inbox every Monday.

MBS Weekly Market Commentary Week Ending 09/11/2020

Treasury yields remain relatively unchanged despite minor fluctuations in both directions over the last two weeks. The Treasury yield curve steepened slightly with the 2-10 spread widening (by 4bps) to 0.54. The 10-year yield is currently 0.67%, and the 30-year is...

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MBS Weekly Market Commentary Week Ending 08/28/2020

The US yield curve saw a sharp steepening after the Federal Reserve’s dovish statements from Jackson Hole. The plan, as described by Jerome Powell, Chairman of Federal Reserve, shifts the Fed’s focus away from a 2% inflationary target to concentrate on employment...

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MBS Weekly Market Commentary Week Ending 08/21/2020

Long and intermediate Treasury yields edged lower last week as 30-year Treasuries experienced a 10-basis point drop while yield on the 10-year fell by 5bps. The accompanying 2-10 Year spread flattened by 5bps due to the 2-Year yield increasing to .16% on Friday....

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MBS Weekly Market Commentary Week Ending 07/10/2020

Intermediate and long Treasury yields declined slightly last week, led by a 10 basis point drop in the 30-year bond yield.  The 10-year yield declined by about 3 basis points, while the 2-10 year spread also flattened by 3 bps, as yields on maturities as long as five years remain pinned in place.  In fact, the short end of the Treasury market has begun to reflect the possibility that the Fed will adopt so-called yield curve control this fall, a variation on quantitative easing where the Fed buys enough securities to cap the yield on a target maturity (generally assumed to be a short-term rate) at a certain level.  What’s interesting is that the 5-year note has begun to trade as if its yield is (or will soon be) pegged, as highlighted by the accompanying chart.  The graph indicates that the 40-day standard deviation of the 5-year yield is approaching its lowest level in years, only a few months after the pandemic-related market disruptions took the note’s volatility to levels last seen during the financial crisis of 2008-10.

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MBS Weekly Market Commentary Week Ending 06/26/2020

Treasury yields declined modestly last week, led by intermediate and long maturities.  The yield on the 10-year note dropped by a little more than 5 basis points, closing at 0.64%, while the 30-year bond yield closed 9 basis points lower to yield 1.37%.  The yield curve also flattened a bit, with the 2-10 year spread narrowing by 3 basis points to 47.5 basis points.  The 10-year TIPS yield (a proxy for the long-term inflation-adjusted or “real” yield) also declined to -0.69%, its lowest level since April 2013.  A notable market development is the bottoming out of realized Treasury volatility, especially for the 5-year note.  The chart below shows the 40-day standard deviations for the 5- and 10-year notes; while the 10-year has returned to mid-February levels, the 5-year note’s StDev recently approached its lowest print since mid-2018. 

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MBS Weekly Market Commentary Week Ending 06/19/2020

Treasury yields were little changed last week, with virtually the entire on-the-run curve closing within two basis points of the previous week’s marks.  The 2-10 year spread ended the week a half basis point tighter at 50.6 basis points, while the 5-30 year spread widened similarly.  The only notable changes were in the TIPS markets; while the 10-year breakeven rate (a measure of market inflation expectations) widened by just under 9 basis points to +1.29%, the yield on the inflation-adjusted 10-year note declined to -0.615%.  Using the Treasuries constant-maturity index for the 10-year TIPS, this was its lowest reported yield since mid-2013 and reflects expectations for very low “real” interest rates in the future.

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MBS Weekly Market Commentary Week Ending 06/12/2020

Severe gyrations in the stock markets left intermediate and long Treasury yields sharply lower on the week.  The yield of the 10-year note declined by 19 basis points to 0.705%, leaving the yield curve noticeably flatter; short-maturity yields remained pinned in place, reflecting continued accommodative monetary policy.  The Fed was, in fact, a major driver of the markets last week, as Thursday’s sharp equity selloff was precipitated by Fed Chairman Powell’s downbeat statement on the short-term economic outlook, as well as concerns that new waves of Covid-19 infections are brewing.

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MBS Weekly Market Commentary Week Ending 06/05/2020

Treasury yields spiked higher last week, capped off with an extraordinary Friday session highlighted by an enormous miss by economists’ forecasts for the May employment report.  Instead of losing the 7 million jobs predicted by a survey of economists, the job market actually added 2.5 million jobs.  While the drop in the unemployment rate may have been overstated by misclassification of workers who were “employed but absent” from work, the report nonetheless highlights the enormous difficulties in predicting the short- and long-term path of the job market and the economy.

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MBS Weekly Market Commentary Week Ending 05/29/2020

Treasury prices barely budged last week, with the exception of the very long end of the yield curve, which sold off modestly.  The 10-year note ended the week yielding 0.65%, while the new 2-year continued to hover around the 0.15% area, ending the holiday-shortened week yielding 0.163%.  The quietude in the Treasury market left the 10-year daily standard deviation at 4.2 basis points, just slightly higher than its level in mid-February when the S&P 500 posted its all-time high level.  (For context, it did reach 12.3 basis points per day in early April, slightly higher than its peak in last 2008 and early 2009.)

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