MBS gave back nearly all of Wednesday's overnight gains, closing UMBS 5.0 at 99.07 — up just 7 basis points from Tuesday's close of 99.00, after touching 99.28 at the morning open. The 30-year survey rate moved to 6.40%, down 4 basis points from Tuesday.

Wednesday opened with a 28-basis-point rally in UMBS 5.0, a direct response to trade policy news that cleared overnight. By close, that gain had compressed to 7 basis points. The 10-year Treasury yield, which fell to 4.243% at the open, finished the session at 4.297% — essentially flat from Tuesday's close of 4.296%. The move unwound almost entirely as the session progressed.

The pattern was straightforward: bond markets bought the trade news overnight, ran out of buyers through the session, and gave most of it back ahead of Thursday's CPI. That's not a verdict on the news — it's a verdict on positioning. Markets were short heading into Tuesday's close. Wednesday's open squeezed that positioning, and by midday the squeeze was over. Holding long into CPI without a fresh catalyst isn't a trade most desks were willing to run.

The practical effect for borrowers is a modest improvement: the 30-year survey at 6.40% reflects some of this morning's gains held into the close. CPI prints Thursday morning. A soft number extends today's modest improvement; a hot number reverses it and pushes rates back toward where they started the week. Wednesday's trade-driven move doesn't change the Fed's calculus — that answer comes from the inflation data.

— David Burson, NetRate Mortgage