As markets digested implications of several fiscal policy changes over the past 2 months, a predictable trading pattern emerged. Stocks and interest rates moved lower together. This isn’t always the way things work, but it is typical during moments where investors are rapidly shedding risk and seeking safer havens. The pattern broke down last week, for a variety of mostly arcane reasons. This meant that rates moved sharply higher even as stocks continued to fall. Although it’s far too soon to declare victory against that volatility, we’re now seeing the bond market (the thing that dictates interest rate movement) act a bit more like its normal self. In other words, today’s data and events contributed to heavy stock losses, and bonds were willing to pick up enough of the slack for interest rates to move lower. This is the 3rd straight day of declines and it brings the conventional 30yr fixed rate back under 6.875% for the average top tier conventional loan.

Bonds Reprise Familiar Role as a Safe Haven Amid Renewed Rout in Stocks

You’ve seen it plenty of times so far in 2025. You’ve wondered what the heck happened to it during last week’s volatile tariff announcement aftermath. Now today, more than any other day this week, a good, old-fashioned flight to safety helped the bond market realize some decent gains. Powell’s speech at 1:30pm ET was the clear catalyst, with warnings for the economy and reassurances for the bond market’s smooth functioning. At this point, bonds are right back in line with the flat, narrow range seen between late February and late March. 

Econ Data / Events

Retail Sales 

1.4 vs 1.3 f’cast, 0.2 prev

Retail Sales Control Group

0.4 vs 0.6 f’cast, 1.3 prev

Market Movement Recap

08:42 AM sideways to slightly stronger overnight.  Minimal reaction to data.  MBS up 1 tick (.03) and 10yr down 0.4 bps at 4.33

10:47 AM 5.5 UMBS are now down 1 tick (0.03) on the day and 10yr yields up 1.2bps at 4.348

01:51 PM Some volatility surrounding Powell, but holding gains, mostly.  MBS up an eighth on the day and 10yr down 2.8bps at 4.308

02:40 PM Stronger during and after Powell.  MBS up 7 ticks (.22) and 10yr down 5.8bps at 4.278

What a difference a week makes. The present example has been entirely different than the previous example in terms of volatility and directional movement. To reiterate our overarching thesis, April 2nds staggering policy changes caused markets to go into a self-destruct sequence, thus leading to a policy pivot and a de-escalation of market turmoil. We’re now playing a slower game made possible by some measure of faith that the administration will respond to warnings in markets if those warnings become grave enough. Last week, we had rampant uncertainty and panic.  Now we just have rampant uncertainty.  Data remains less interesting than normal in the short term, but the Fed policy response is always notable. We’ll get an update from Powell this afternoon at 1:30pm ET which could help refine our understanding of how the Fed will balance tariff-driven inflation expectations versus the notion of cutting rates to offset tariff-driven economic softening. 

While no additional details were disclosed, the housing regulator’s inspector general typically probes cases which are prosecuted by the Department of Justice.

A bipartisan group of representatives co-sponsored the bill, aiming to make permanent and expand eligibility for a deduction previously offered for 14 years.

The deal has an extensive capital structure, which is expected to repay investors sequentially, with notes enhanced by subordination.

As tariff turbulence continues, BofA is predicting a slowdown, not a downturn. But America’s second-largest bank is also signaling that it’s prepared for a more severe scenario.

The agency is seeking input on how to better open up industries up to new entrants. Some see this opening the door to more competition for banks.

Financial markets experienced relatively extreme volatility on several occasions following the April 2nd tariff announcements. The bonds that underlie mortgage rates were no exception, thus pushing rates higher at one of the fastest weekly paces in years.  Things have been calmer so far this week, with the first two days looking more like a typical highly active trading day from before the tariff announcement.  Both the mortgage bonds and mortgage lenders appreciate lower volatility. It is especially appreciated at the moment because it is taking bonds back toward their previous range.   The average lender had already moved top tier 30yr fixed rates back under 7% yesterday. Today simply added to the momentum.   Despite the friendly move and the relative calm, this still isn’t an environment where it makes sense to take anything for granted in terms of today’s rates being available beyond the present day.

Absence Makes the Bonds Grow Stronger

Bonds improved at a moderate pace for the 2nd day in a row, thus marking the first sustained push back against the recent rate spike.  The gains are notable because they are not being driven by any big, new developments on the trade/tariff front. Instead, it is the absence of any such developments that is allowing the market to get back into a relatively calmer groove.  That said, we wouldn’t take the calm for granted.  Bonds have merely moved back to more nimble territory as we wait for more policy clarity.

Econ Data / Events

Import Prices

-0.1 vs 0.0 f’cast, 0.2 prev

Export Prices

0.0 vs 0.0 f’cast, 0.1 prev

NY Fed Manufacturing

-8.1 vs -14.5 f’cast, -20.0 prev

Market Movement Recap

10:16 AM Choppy, sideways, but slightly stronger overnight.  MBS up 3 ticks (.09) and 10yr down about half a bp at 4.367

01:04 PM Gains continue.  MBS up a quarter point and 10yr down 5.5bps at 4.32

03:13 PM Down an eighth from the best levels of the day, but still up 5 ticks (.16). 10yr down 4bps at 4.333, but up a few bps from best levels. 

04:34 PM Avoiding further weakness this afternoon.  MBS up 5 ticks (.16) and 10yr down 4.4bps at 4.33