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Treasury yields fall following U.S. attack on Iranian general

Yields on the 10-year Treasury slipped in Jan. 3's morning hours as investors moved money into safer instruments following the U.S. attack that killed an Iranian general.

The attack "will escalate tensions in the Middle East and spark a risk-off trade," said Keefe, Bruyette & Woods equity analysts Brian Gardner and Frederick Cannon in a report.

At noon, the 10-year yield was 1.808%, nearly 7 basis points from its previous close, according to data from MarketWatch. The yield fell as low as 1.802% at 6:46 a.m., recovering to rising to 1.838% at 9:49 a.m., but started slipping again.

The 30-year fixed rate mortgage is benchmarked to movements in the 10-year Treasury. On Jan. 3, the average for the 30-year FRM was 3.68%, down 3 BPs from the previous day, according to Zillow's mortgage rate tracker. However, in the past week, there was some volatility in the rate, with a peak above 3.75% and a trough below 3.65%.

However, that might have reflected the high end volatility in the 10-year Treasury, which was above 1.93% at one point on Dec. 30, fell back to 1.88% later that day, rose back to 1.92% before New Year's Day and peaked at 1.945% in the early morning hours on Jan. 2.

Volatility in the 10-year Treasury when news breaks is common. Clever Real Estate documented movements related to Pres. Trump's Twitter activity. In reaction to global economic news, at one brief point in August, the 10-year yield was under 1.5%.

Although the Dow Jones Industrial Average was down over 250 points during morning trading before starting to move back up, mortgage stocks were a mixed bag. Several at one point dipped before their previous day's closing price but by midday recovered to be above or near that level. An exception was Impac Mortgage Holdings, a thinly traded stock that dropped 4.13% on the day so far.

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