Bonds bounced back Friday. UMBS 6.0 closed at 98.84, up 65 cents, and the 10-year yield fell 4.1 basis points to 5.160%. That's the first real up day for mortgage bonds after two days of heavy losses.

The session opened firmer, with UMBS 6.0 at 98.42 shortly after 9 AM ET. It gave some of that back mid-morning, enough that some lenders repriced worse by 10:30. Around noon a headline said US–Iran talks had moved into a technical stage. Oil dropped from about $94 to under $92 and bonds went straight to their best levels: 98.53 at noon, 98.69 by 12:19, 98.77 at 3:07, and a close at 98.84, the high of the day. That wins back about four-fifths of Thursday's 80-cent loss.

It wasn't the data. Every release came in at or above forecast. Durable goods were flat against an expected 0.4% decline, core capital goods orders rose 1.6% against 0.5% expected, and consumer sentiment was 48.1 against 47.6. Inflation expectations matched forecast at 4.6% for one year and 3.4% for five. Stronger numbers usually push rates up, not down. The move came from the headline. The shape of it matters: the 2-year fell 7.7 basis points and the 10-year 4.1, while the 30-year Treasury actually rose 1.2. The front end led, and the long end sat it out. One strong day after a two-week selloff this fast doesn't show the trend has turned.

Borrowers barely felt it. MBS Live's afternoon index had the top-tier 30-year fixed up 0.04, still just under 7.50%. MND's end-of-day index had it down 0.02 at 7.43%. Either way, rate sheets didn't pass along much of the bond rally. The 30-year average is still up more than half a point in two weeks, a pace seen only three times between 2010 and 2019. Next week is heavy: PCE inflation on Wednesday, September 30, and the jobs report on Friday, October 2, with month-end and quarter-end trading on top.

— David Burson, NetRate Mortgage