Sector Update

August 9, 2021

Last week yields finally broke a five-week streak of declines with yields up 6-8 bps on 3-10 year maturities. It was not without quite a bit of volatility. Through Wednesday of last week, yields were lower for the week even after a wild Wednesday morning that saw yields plummet on a weak ADP report at 7:15am then rocket higher on a strong ISM report at 8:45am (all times CDT). Yields continued to push higher on Thursday and Friday on strong economic data, notably payrolls on Friday.

Activity last week can be generalized as more customers selling than usual earlier in the week and increased purchase activity in the later. There is still sizable liquidity among depositories and after watching yields decline for five straight weeks, the move up after seeing them initially slip further to start the week, was welcome.

Looking at several charts below, one can’t help but wonder if last week began a new trend or if it was just another bump up in yields in a longer trend downwards. Unfortunately, I can’t answer that question, but I do know this. After seeing the 5-year trade as low as 0.61% last Wednesday, even if just for a brief moment, the ~0.80% we see this morning seems to have focused investors, especially considering the highest close this year is 0.98%.

Today – Yields up and curve slightly steeper, equities mixed

Yields end week higher, curve steeper

5- and 10-year yields still in February territory, start of new trend?

Yield Curve Shape – 2s-5s and 2s-10s break above 20-day MA for first time since June

Food for Thought – Prepay speeds released last week, slower but still elevated

Sector Commentary (click on links for more in-depth look)

What We’re Reading

Market Today | Daily

Weekly Recap | Weekly, Friday

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

MBS Prepay Commentary (August) | Monthly, 5th business day

SBA Prepay Commentary (July) | Monthly, 10th business day

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