Treasurys

US 30-year yields dropped seven basis points to 4.79%, unwinding part of Thursday's surge that was driven by a somewhat disappointing inflation reading and a weak bond auction.

The current Treasury yield curve is leading homeowners to pay mortgage rates at least 120 basis points more than they should, equal to an extra $245 a month on a $300,000 loan, their letter said.

Top Fed officials are coalescing around the idea that tighter financial conditions after a recent surge in U.S. Treasury yields may substitute for additional increases in their benchmark interest rate.

"There is nothing that is saying we need to do anything imminent anytime soon," the Federal Reserve governor said in an interview on CNBC Tuesday.

New mortgage bonds now offer yields that are about 1.66 percentage point higher than U.S. Treasuries, according to data compiled by Bloomberg. That's the most relative to corporate bonds in 17 years. 

Stock futures fluctuated on Wednesday as the latest data showed the U.S. economy expanded at a slower rate than previously thought in the second quarter, fueling speculation the Federal Reserve is nearing the end of its rate-hike cycle.

The yield on 30-year securities has climbed almost 25 basis points over the past three sessions, returning it to levels last seen in mid-November when inflation was still above 7%, more than double the current rate. Ten-year borrowing costs rose to around 4.15%. 

In their latest assessment of the bond market outlook, Morgan Stanley strategists are challenging the former head of the Federal Reserve Bank of New York's view that losses are likely to deepen.

Investors are piling into longer-dated notes on bets that policy makers will succeed in taming inflation, an outcome that will deliver strong and stable returns on debt.

Excess returns on the bonds, which compares mortgage backed security performance to Treasuries, are -0.94% for March, on track for the worst relative performance since September.