Another Mid-Day Reversal Driven by Dueling Headlines

The overnight session featured a modest but clearly-defined rally in response to hopeful headlines on the Iran war. But as early a 9am ET, a complete reversal was beginning to take shape. Bonds remained in positive territory until the 11am hour when war headlines kicked selling into higher gear. Specifically, reports suggested Iran rejected the U.S. framework that helped bonds overnight. Separate news cited CIA sources, claiming Iran can withstand a Hormuz blockade for months. Selling continued in the afternoon on reports that had more to do with escalation risks (Saudi Arabia and Kuwait allowing U.S. forces to operate from their bases, explosions heard in Southern Iran). All told, 10yr yields were up more than 4bps by 3pm and MBS were down a quarter point.

Econ Data / Events

Challenger layoffs (Apr)

83.387K vs — f’cast, 60.62K prev

Continued Claims (Apr)/25

1,766K vs 1800K f’cast, 1785K prev

Jobless Claims (May)/02

200K vs 205K f’cast, 189K prev

Unit Labor Costs QoQ FinalQ1

2.3% vs 2.6% f’cast, 4.4% prev

Market Movement Recap

08:32 AM stronger overnight and no reaction to econ data. MBS up an eighth and 10yr down 1.5bps at 4.331

11:31 AM moving into weaker territory now. MBS down 1 tick (.03) and 10yr up 1.4bps at 4.361

01:13 PM New lows for MBS, down 5 ticks (.16) on the day. 10yr up 3.4bps at 4.38

03:00 PM MBS at new lows, down 9 ticks (.28) and 10yr up 4.3bps at 4.39