The morning's rally has partially pulled back midday. UMBS 5.0 is at 99.14 — down 14 basis points from the 99.28 open, though still up 14 basis points from Tuesday's close. The 10-year yield has drifted back to 4.28% from 4.24% at the open.

The overnight driver hasn't changed — trade policy uncertainty cleared and bonds rallied on it. What's happening now is digestion. Markets bought the news hard at the open, and through the morning session the bid has softened. This isn't a reversal; it's the market finding a level. The 10-year moving from 4.24% back to 4.28% is four basis points of give-back on a 5-basis-point overnight gain — that's consolidation, not collapse. Lenders who repriced better this morning are likely holding, though some may trim late in the day. The window from this morning's sharpest levels has narrowed. CPI prints tomorrow morning, and that's the next real test. Holding long into an inflation print takes conviction, and not everyone has it.

— David Burson, NetRate Mortgage