Last week's accelerated run-up in yields on the 10-year Treasury had been essentially reversed on Monday, but were still above where they started the month at.
"We've reversed some of [the December] sell-off but it's not reversed all of the way," said Mahesh Swaminathan, director, head of residential mortgage-backed securities strategy at Credit Suisse.
Swaminathan said primary market mortgage rates for 30-year product late Monday morning were at roughly 4.80%, down from a high of about 5% last week but above the record low for this year of 4.17%.
Current coupon secondary market rates, at 4.12% late Monday morning, remain higher than where they were at the start of the month (around 3.77%), but the recent downward move erased the increase seen last Monday, when they were about 4.11%.
The primary-secondary market spread has been relatively tight and indicates lenders have been absorbing some of the costs, Swaminathan said.
According to a new fixed-income report by Jefferies, the decline in bond market yields that began late last week has been corrective and also influenced by a lack of Treasury supply and Fed purchases. (One traditionally used long-term mortgage rate benchmark, the 10-year yield, was at 3.27% around noon.)
