UMBS up 14 bps on the morning

Bonds were only modestly stronger and mostly sideways for most of the overnight session.  Early U.S. trading kicked things into a slightly higher gear starting right at 8am ET.  At that point 10yr yields dropped from a flat range in just over 4.24% down under 4.21–currently down 6.3bps on the day at 4.202.

MBS are underperforming the long end of the yield curve, but are also in noticeably better shape with 5.5 coupons up a quarter point.

We don’t have any solid color to explain the mini surge this morning, but it does coincide with a clear uptick in volume at 8am.  Some analysts have suggested it’s as simple as elevated activity among leveraged fast money traders heading into the 8:20am CME open.  That’s as good of an explanation as any for now.

Stocks markets barreled ahead this week, putting the S&P 500 on track for the best run so far of 2024, as

a raft of central bank meetings left traders convinced that interest rates cuts are coming soon.

Existing home sales rose 9.5% in February to a seasonally-adjusted annual rate of 4.38 million. This was down 3.3% compared to a year ago. The median home price rose 5.7% YOY to $384,500. First time homebuyers accounted for only 26% of sales, which is down from their historical level of 40% or so. It is clear the first time homebuyer is priced out of the market. Investors and second home buyers increased their share to 21%.

For-sale inventory is picking up, according to Redfin. During the 4 weeks ending March 17, the number of homes for sale increased 5%, the biggest year-over-year increase since October 2022. Redfin’s homebuyer demand index is up 9%.

While it’s not technically a 9 day weekend for the bond market, it might as well be.  It’s not that the upcoming week is inconsequential in terms of economic data and events, just that the data isn’t on a high enough tier to change the big picture.  Perhaps if rates were closer to boundary of their recent range we could entertain next week’s reports helping to spark a lead-off toward higher or lower rates, but from our current perch, the most likely outcome would simply be a revisiting of a recent range boundary.

The fact that next Thursday is an early close before a full closure on Friday only adds to the case for traders tuning out until April 1st.  As for today specifically, it was a winner in terms of bond market gains, but  not for any overt or interesting reason.

UMBS are up 22 bps at 100.98