Summary:
The article discusses an unusual market scenario where bond yields reached their second-best closing levels in years, despite minimal volatility and low trading volume. This paradoxical “excitement and boredom” dynamic stems from stagnant economic data during a government shutdown, combined with investor anticipation of future rate cuts. Key metrics include 10-year Treasury yields dropping to 3.981% and MBS gaining an eighth of a point. The piece highlights how macroeconomic stagnation can still produce notable yield movements when viewed through a longer-term lens.
What This Means for You:
- Lock rate opportunities: The dip in 10-year yields below 4% creates a favorable window for mortgage rate locks
- Portfolio rebalancing: Bond investors may consider duration adjustments given the yield curve’s reaction to rate cut expectations
- Market timing awareness: Recognize that significant yield movements can occur even during low-volume periods
- Caution ahead: These gains appear fragile without substantive economic data shifts – prepare for potential reversals
Original Post:
Strange Combo of Excitement and Boredom
Mon, Oct 20 2025, 4:17 PM
Boring stuff first: there was no significant data, news, volume, or volatility today. Bonds gained modest ground early and then held mostly sideways through the 3pm CME close. In that sense, it was just like most other days during the government shutdown (and quite a few even before the shutdown). The excitement is entirely due to outright levels. It was the second best close for 10yr yields in over a year and the 2nd best for 2yr yields in over 3 years (a reflection of the rate cut outlook).
10:24 AM
Slightly weaker overnight, but now stronger after 8:20am rally. 10yr down 1.6bps at 3.994 and MBS up 3 ticks (.09)
01:58 PM
Flat all day so far. MBS up 3 ticks (.09) and 10yr down 1.9bps at 3.99
03:58 PM
Heading out near best levels. MBS up an eighth and 10yr down 2.7bps at 3.981
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Extra Information:
Federal Reserve Meeting Calendar – Track upcoming rate decision dates that could impact yield movements
Daily Treasury Yield Curve Rates – Official government data for historical yield comparisons
CME FedWatch Tool – Market-implied probability calculator for future rate changes
People Also Ask About:
- Why do bond yields fall during government shutdowns? Reduced economic activity and delayed data releases typically create a “flight to quality” into Treasuries.
- How do MBS prices relate to Treasury yields? Mortgage-backed securities generally move in the same direction as Treasuries but with additional spread risk.
- What’s considered a significant move in bond yields? Daily moves exceeding 5bps in 10-year yields or 1/8 point in MBS are typically noteworthy.
- Can yields keep falling without new economic data? Yes, through technical trading and position adjustments, but sustained trends require fundamental drivers.
Expert Opinion:
This market behavior exemplifies the “calm before the storm” phenomenon in fixed income – seemingly quiet sessions often precede major volatility when economic data resumes. The compression of 2-year yields suggests traders are aggressively pricing in Fed easing, creating potential dislocations if the central bank maintains a more hawkish stance. Fixed income investors should monitor liquidity conditions, as thin trading volumes during shutdowns can exaggerate price movements.
Key Terms:
- government shutdown bond market effects
- 10-year Treasury yield technical analysis
- mortgage-backed securities price movements
- low volatility bond trading strategies
- Federal Reserve rate cut probability indicators
- CME close Treasury market liquidity
- duration risk management during yield compression
ORIGINAL SOURCE:
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