• Mortgage-backed securities (MBS) are down almost half a point early this morning.
• Bonds got spanked overnight despite a lack of overt motivations.
• Yields had risen more than 5bps by the open, but at least data isn’t adding to the weakness.
• Long-dated US Treasuries headed for their worst week of the year amid signs of unexpected resilience in the US’s economy and fresh reasons to fret about its ballooning budget deficit.
• Productivity rose 3.7% in the second quarter, which was way higher than expectations.
• Announced job cuts fell 42% in July, according to outplacement firm Challenger, Gray and Christmas.
• Hot labor-market data is raising concern the Federal Reserve will have to push up interest rates even further to cool inflation.
• Many are theorizing that the market is reacting to the glut of supply coming from the US Treasury.
• The U.S. debt is five times larger just 12 years ago.

Mortgage Today 8/3: Bonds Get Spanked, MBS Down Almost Half a Point

The bond market took a beating overnight, with yields rising more than 5bps by the open. This was despite a lack of overt motivations, as data was generally in line with expectations. The sell-off was likely driven by a combination of factors, including rising Treasury borrowing needs, lower buyback plans, a ratings downgrade, and the largest foreign holder embarking on big selling campaigns to control its own yield curve.

MBS were also down almost half a point early this morning, as the sell-off in bonds weighed on the housing market. The sell-off in bonds is likely to continue in the near term, as investors continue to price in the risk of higher interest rates. However, if the jobs report comes in lower than expected tomorrow, it could provide some relief to the bond market.