Pre-market gains from overnight peace deal reports stuck around all session. UMBS 5.0 closed at 98.82, up 52 ticks from Tuesday's close. The 10-year Treasury yield finished at 4.347%, down 7.8 basis points. The 30-year conventional rate settled at 6.44%.

Wednesday opened with a 40-tick overnight gap before the morning session started. Bonds then drifted incrementally better through the afternoon — adding another 12 ticks to close at the session high of 98.82. The move held all day without a reversal.

The driver was macro, not domestic data. ADP came in at 109,000 private jobs in April — above expectations — which ordinarily would pressure rates. It didn't. The geopolitical catalyst outweighed the labor print: Middle East ceasefire/peace deal reports pulled oil lower, compressed inflation expectations, and sent investors into Treasuries and agency MBS. The 10-year yield dropped 7.8 basis points on the full session. Markets are starting to discount some of the Fed's higher-for-longer conditions.

For borrowers, 6.44% is 10 basis points better than yesterday's quote and 12 basis points below where the day opened. Thursday's weekly Jobless Claims will be the next signal — elevated claims extend this rally, flat or declining claims keep today as a ceiling. The geopolitical situation that triggered the move is fluid; a reversal in those headlines is the primary downside risk to today's gains.

— David Burson, NetRate Mortgage