Market volatility rises ahead of Veteran’s Day

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Published Date 11/10/2023

Slightly better this morning after the strong selling yesterday pushed MBS prices down 46 bps. Yesterday Powell stood his ground indicating the Fed may not be finished increasing rates, the weak 30 year bond auction sent the 10 year note yield 13 bps higher, and the technical resistance at 4.50% for the note combined driving rates higher. This morning some relief, at 8 am ET the 10 year note at 4.58% -4 bps, MBS prices began +9 bps.

Nothing of consequence overnight, early this morning Dallas Fed’s Lorie Logan focused on the central bank increasing its liquidity infrastructure but still can’t eliminate risks totally. “It remains incumbent on all players in the financial system — banks, other market participants, as well as central banks in our roles as both regulators and financial institutions — to appropriately manage liquidity risk,” Logan said in prepared remarks for a speech at the European Central Bank Conference on Money Markets. Logan pointed out all banks should be prepared to use the Fed’s emergency lending facility better known as the discount window. Banks baulk on using it, when a bank goes to the window it’s a sign of trouble in the bank and immediately examiners are all over it like ants on a sugar cube, Logan had nothing to say about US monetary policy.

This week was absent of key economic releases, yesterday’s weekly jobless claims and today’s University of Michigan consumer sentiment index were the headlines. The week dominated by Fed officials led by chairman Powell. Day to day volatility continues, increasing risks for lenders to the mortgage world as well as requiring short term decisions. If comparisons are based on week to week changes this week would appear with little change, the 10 year note traded between 4.68% and 4.51% Wednesday’s low. By the end of today the 10 year note should settle at 4.58% up 6 bps from last Friday.

At 9:30 am the DJIA opened +170, NASDAQ +39, S&P +17. 10 year note at 9:30 am 4.59% -3 bps: FNMA 6.5 30 year coupon +13 bps from yesterday’s close and -17 bps from 9:30 am yesterday.

Veteran’s Day tomorrow; banks open today but will close tomorrow based on the Fed’s holiday schedule.

At 10 am the Nov mid-month University of Michigan consumer sentiment index expected at 63.5 from 63.8 in October, the index hit at 60.4. Sentiment continues to fall.

Source: TBWS

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