WTH just happened – mortgage rates rally as investors run for cover 🚨📉🏃♂️➡️
Flash Market Update
With the Non-Farm Payroll report now in the rearview mirror, and Friday’s CPI inflation data the iceberg straight ahead, today was expected to be a quiet day.
However, despite the lack of any major data releases, bonds had a surprisingly good day.
Weakness in the broader equity market seems to have played a role, even if you don’t see it in the overall performance of major stock indices.
Perhaps, the risk-off move is driven by the ongoing weakness in crypto, after the two biggest coins by market cap have plunged 43% (BTC) and 55% (ETH) in the last few months.
Precious metals are still down from their recent all-time highs, adding to the resurgence of bonds as the preferred safe haven.
Meanwhile, contributing to the momentum in bonds was a stellar 30-Year Bond auction – one of the best on record.
The $25 billion auction drew a high yield of 4.750 percent and a bid-to-cover ratio of 2.66.
The bid-to-cover ratio is a measure of demand for the supply issued.
The higher the ratio the more successful the auction, as it signifies that the dollar amount of bids received exceeds the total bonds sold.
To put today’s demand into context, last month’s 30-Year auction had a bid-to-cover of 2.42 and the average of the last ten auctions was only 2.37.
The end result was a solid 12-bps improvement for mortgage rate prices, as the big inflation report (CPI) awaits tomorrow.
Thanks for reading.
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