Thursday's rally reversed in the afternoon — UMBS 5.0 closed at 98.13, down 9 basis points from Wednesday's close after peaking at 98.39 in the morning.

Thursday opened with conviction and lost it by mid-afternoon. UMBS 5.0 ended at 98.13, 9 bps below Wednesday's settlement and 26 bps off the morning high. The 10-year Treasury finished at 4.484%, up 2 bps on the day. There was no single news catalyst for the reversal — oil prices crept higher through the afternoon and Trump's Day 1 meeting with Xi produced no peace deal announcement, removing optimism that had been priced into the morning session. Import prices for April came in at 1.9%, nearly double the 1.0% forecast, which may have added to the late-day selling pressure.

The morning session looked like a clean recovery from this week's hot CPI data. By midday positions were trimming but still positive. Then the afternoon unwound it — bonds sold back through the morning gains and closed below Wednesday's settlement. That pattern — a strong open that fades to a weaker close — signals a market without conviction, not one changing direction.

For borrowers, today nets out as a wash. Rate sheets that repriced lower this morning will likely adjust back toward 6.57% tomorrow as lenders reflect the afternoon close. Those floating are watching for whether Thursday's reversal extends into Friday or the market finds support.

— David Burson, NetRate Mortgage