This is Matt Graham with the MBS Live Market Update bonds were in much more of a holding pattern last week versus the relentless run higher that dominated the month of March. The most notable development was the divergence between near term and longer term oil futures prices. In other words, if we’re looking at just the front month contract, things were moving up, up and away for oil prices. If we look out to a delivery month, such as December, we can see things leveling off and actually moving lower over the past two weeks, not just last week in terms of headlines and market movement. Wednesday night’s, Trump speech was a focal point. Markets were expecting or hoping to hear more about deescalation and a potential end to the war, but the takeaway ended up being quite the opposite. Oil prices spiked quickly in that front delivery month for oil futures and bond yields moved higher in unison, but the longer term oil futures did much better even though they spiked initially, they turned around the following morning after headlines that said Iran and Oman were working on a resolution to reopen the straight up war moves, which is probably the biggest deal when it comes to impacts on oil prices surrounding this conflict bonds were definitely willing to follow the turnaround in longer term oil prices and 10 year yields actually hit their lowest levels of the week during a domestic session just about an hour and a half after those headlines came out from there, it was a sideways grind, very sideways into Friday mornings jobs, data, and then yields spiked on that release. Which showed non-farm payrolls coming in at 178K versus 60K forecast. That is a huge beat in the context of what we’re used to when it comes to the jobs report, but there has been a lot of volatility in both directions as far as the payroll count is concerned for a variety of reasons and the average trade desk and analyst will tell you that there is much more focus on the unemployment rate these days as a result. On that note, unemployment was only down a 0.1% move at 4.3 versus 4.4. And the caveat is that the labor force participation rate dropped a 10th of a percent as well. So adjusting for that, it was basically a flat performance for the unemployment rate. And that helps us reconcile the absence of any huge move in the bond market. Other data was respectable on the week, but didn’t have a huge impact when it came out. Jobless claims 202K versus 212. No signs of stress there. ISM manufacturing was on target despite prices being the highest in several years, showing the effects of oil prices. Retail sales did better than expected, but that was for the month of February, so traders didn’t read much into it because it has not yet had time to reflect any demand fallout from higher fuel prices. The week ahead, we’ll see more attention paid to econ data, especially Friday’s CPI, because that could show early impacts from oil prices and then just this morning, we had ISM non-manufacturing also potentially showing inflation impacts from oil prices with the price component of that report ticking up to the highest level since 2022, although just by a little bit apart from the data, and probably more important than the data will be ongoing. Headline watching with respect to potential deescalation or end to the war, and when that happens. There’s no guarantee that the bond market will quickly turn around and revisit the levels that existed before the war. In fact, it’s a guarantee that won’t happen in short order. We have knock on effects and second order effects to process. We have to wait and see what the data is going to show. As far as aftershocks and fallout from higher oil prices, but when an official corner has been turned, we will get something back as far as the rate market’s concerned, and everybody will be watching to see exactly how much we get back and how quickly that happens. That’s gonna 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 MBS Live!
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.