Good Morning on this Wednesday (and best day of the week),
Three more trading days this year (really two, as the bond market closes early on Friday). Bonds having a really good day today. We are not seeing it in the rate sheets yet, and likely wont this week, as trading is thin, most trading desks are empty(ish), and concerns over prepayments will keep rates from falling as quickly as the yields do.
There was a 5-yr treasury auction which doesn’t typically mean much or move markets but today, it did.
The auction was met with high demand and yields are falling. The 10-yr note (which we care more about in our world) is seeing a lot of spillover love as well. The 10-yr is down to 3.79%… let’s go!!! Mortgage bonds are up but have hit a line of resistance, which we last touched in May (that’s how much better pricing has gotten). There is not much velocity to push through so we will see what happens here.
While I don’t see much danger in floating as rates are not likely to worsen, there’s also not much benefit to floating this week. With no benefit, the bias is to lock.