Bonds closed Monday with a net gain on the day, reversing all of the overnight weakness and then some. UMBS 5.0 finished at 99.17, up 20 basis points from Thursday's close. The 10-year Treasury yield settled at 4.292%, down 2.4 basis points.

The day was entirely driven by Iran war headlines. Markets opened with overnight selling after U.S.-Iran peace talks collapsed in Pakistan over the weekend and the U.S. imposed a blockade of the Strait of Hormuz — oil prices surged and 10-year yields followed. But bonds were already bouncing back at the open on reports that Iran was considering abandoning its uranium enrichment program. That first headline turned out to be bogus, but a second round of de-escalation headlines around 12:30 PM drove the real recovery. By 3:36 PM, UMBS 5.0 was up 16 basis points and the 10-year had recovered to 4.297%. The final close held most of those gains.

Existing Home Sales for March printed at 3.98M — below the 4.06M forecast and down from 4.09M in February. Weak housing data was on the calendar, but the bond market was focused on geopolitics, not the NAR release.

The average 30-year fixed rate holds just below 6.40% for the third consecutive day. The MBS recap's lock/float framing is appropriate: volatility has flattened significantly compared to March, which creates room for different strategies. Risk takers can use 4.34% or 4.40% on the 10-year as lock triggers. The risk-averse crowd has no reason to lower their guard until the 10-year breaks convincingly below 4.30%.

— David Burson, NetRate Mortgage