This is Matt Graham with the MBS Live Market Update. It was a relatively brisk week of selling in the bond market last week with yields rising at the fastest weekly pace since the week of the Fed announcement back in late October, and it was basically neck and neck with that. Apart from that, you need to go back to May, 2025 to see more aggressive selling and this was made all the more interesting by the fact that there was quite a bit of economic data, but the movement. In short term timeframes did not line up well with that economic data. We’ll break it down on Monday, ISM at manufacturing came out at 48.2 versus 48.6. The prices paid component was lower. None of that in and of itself suggests any weakness in the bond market. Nonetheless, it was the biggest report of the day, so we would expect to see the movement lineup with the data, but instead the movement was in place well before the data and after the ISM numbers came out. Bonds were essentially sideways, not just on Monday, but all the way through Tuesday for that matter. Picking things up on a Wednesday. We had a DP employment. This is the monthly version, not the weekly version coming in at minus 32K versus a 10 K forecast. That sounds like the sort of thing that would be good for rates and indeed rates were improving on Wednesday morning, but notably, all of that improvement was in place before the ADP data came out, and there was no earlier data or really overnight event to explain the move. Then at 10:00 AM ISM non-manufacturing or ISM services came out. It was fairly close to consensus at 52.6 versus 52.1. Yes, that’s a little bit of a beat, but not enough of a beat to justify the weakness seen in the bond market that followed. We were able to forgive that because bonds ended up. Moving back toward lower yields by the end of the day, and that was the lowest closing level of the week. Then on Thursday, the trend toward higher rates began in earnest one that continues through this morning. We could attempt to blame the econ data with the jobless claims coming in at 191 versus 220 forecast, and that is the lowest level since 2022. Here again. There was not an immediate reaction to the data itself. Rates actually rallied. All the way through 9:15 AM far too late in the morning to attribute the subsequent selling to jobless claims data. There really wasn’t super heavy selling on Thursday, but things picked up on Friday and you. Yet again, not because of econ data. We did have data, but it was a varied laid PCE inflation from the month of September, and then we had consumer sentiment at 10:00 AM coming in a little bit weaker than expected on the condition side of the equation.
And a little bit stronger than expected on the overall sentiment side, not the sort of thing that it would be a market mover, and there was no major spike in volume to suggest that was the case. Bonds sold off to the weakest yields of the week, and that brought 10 year yields pretty close to the top of their. Three month range boundary. Now this morning we have additional selling pressure, no economic data to pin that on, and so we have to ask ourself what exactly is going on in the bond market. First off, we can go right back to the Thanksgiving week weirdness, the vibe that we talked about last week. And to refresh your memory, it just says that on Thanksgiving week, the bond market can do weird things for no apparent reason, and those things can be completely erased in the following week. If you zoom out to a wider term perspective, you could easily categorize Thanksgiving week as a temporary break below the prevailing range. The super tight prevailing range would be between 4.07 and 4.17 in 10 year yields. And so the move back to 4.14 by the end of the week was very consistent with that. The other things we can consider is we could be trading the technicals themselves and the broader range boundary would be around 4%. Maybe 3.99 and we challenged that on Thanksgiving week, and then last week could be a technical bounce, taking us back up toward the top of that range that also fits. Last but not least, the market could actually be looking toward this week’s risk events. Those include the Fed announcement on Wednesday. And the Jolts data on Tuesday. We also have a round of treasury auctions playing out earlier than normal due to the Fed announcement. In other words, instead of Tuesday through Thursday, we get auctions today, tomorrow, and Thursday. Treasury auctions aside. Expect Tuesday’s jolt data. That’s job openings and labor turnover survey and Wednesday’s fed announcement to be the two biggest potential sources of bond market volatility. 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.