President Obama signed a deal late last night to end the partial government shutdown. The market recovered all morning losses causing a re-price for the better.
Mortgage rates increased slightly yesterday as hesitant investors wait for news regarding the government shutdown. Trading volumes are 75% of the 30-day moving average showing the direct impact the political uncertainty has on the MBS market.
Treasuries futures soared on headlines about a tentative deal; but the MBS market was closed. Investors are pining for economic data, but have to settle for the political soap opera.
Mortgage rates remained flat Friday. The market saw more volatility than the previous week, however any potential long term moves hinge on the government reopening for business. Investors are eager to see the employment report compiled prior to the shutdown, however it still has not been released. Thursday is the big news day with Jobless Claims and the Philadelphia Fed Survey still scheduled to be released.
It was a rough start in the morning yesterday but a rally in the afternoon helped turn us in the right direction. The turnaround was caused by a better than expected 30-year treasury auction as well as public comments by multiple Fed officials stating they did not expect any taper of the QE program before the end of the year.
The government shutdown shows its first sign of easing as housing Republicans prepare to meet with President Obama for the first time since the shutdown began.
The FOMC minutes from September will be released today at 2 p.m. ET, which will provide further details about the direction the Fed is heading with its current bond buying program.
Yesterday’s morning rally was a result of investors pulling money out of the equity market and bonds were the benefactor, however, those gains were erased by an afternoon sell off.
Although concerns over the budget and debt ceiling continue to weigh on sentiment, the drop in both yields and volatility in Treasuries is a sign that investor confidence in a resolution is outweighing worry over the current situation.
It appears the markets are more interested in the Employment Situation Report than the government shutdown. However, the Employment Report will not be released today, due to the shutdown.