The rebound in US Treasuries outpaces MBS, AI weighs on tech stocks and oil prices deal another blow

⑴ On Thursday, U.S. Treasury bonds rebounded within this week’s range. The 10-year yield touched a low of 4.449% intraday before climbing back to around 4.46%, remaining below the 4.484% midline of the Bollinger Bands. However, the agency MBS spread lagged behind and did not keep pace with the Treasury rally. ⑵ Broadcom released earnings guidance last night that came in below expectations, resulting in much higher volatility than usual in U.S. stock indexes. The Dow Jones rose 1.1% due to falling oil prices, while the S&P 500 and Nasdaq dropped by 0.1% and 0.7%, respectively; the VIX edged up by 0.1 points to 16.20. ⑶ Crude oil futures plummeted, with near-month WTI and Brent contracts down 3.3% and 2.8%, respectively. The U.S. dollar slipped by 0.3%, and the Japanese yen fell back below the 160 mark. Investment-grade credit spreads were mostly unchanged, and at least five investment-grade issuers have new bonds pending. ⑷ Trading was subdued in the agency MBS market, with the 5% and 5.5% coupons being the most active. MBS prices for various maturities widened against 10-year Treasury yields, while swap spreads remained basically flat. Agency prepayment data will be released tonight, and the market is closely watching net supply figures for next Monday.