Trade Tensions Reignite: China and the U.S. Back in the Ring | Oct. 13, 2025

Jim Glennon (: 00:18

Welcome to Optimal Insights. I'm your host, Jim Glennon, Vice President of Hedging and Trading Client Services at Optimal Blue. Let's dive into today's episode. Welcome. Thank you for being here. We are recording this on Friday, October 10th, of the market holiday on Monday.

a lot to talk about nonetheless, a lot is going on right now as we're recording this. So we'll get into that in the market update. There's some renewed trade negotiations or kind of fighting between us, the US and China. Also, the government shutdown is still big news chambers are about to take a long weekend that's still unresolved and a lot of government workers are either

furloughed or are working without being paid. So we'll get into that a little bit as well. then we're going to go into just a little bit of a 101 on mortgage backed securities. So last week we talked to Justin Monahan of TradeWeb and he gave us a bit of the history and technical background of how MBS are traded and priced. We wanted to just really take a step kind of sideways and

and go back to just what is it MBS? Why does it exist? How did it start? Why is it super unique in this country? What does the market look like? How does it mortgage rates? So we'll talk about that in a few minutes as well. Before we get into the market update, OBMMI, we are 6.3, but it will be lower after today's market activity, seems. Equities are off big and the 10 years down close to four right about now.

heavy psychological level there for the 10 year. We're still hoping to get a five handle, even being in the low sixes lately, we're seeing volume elevated. You're probably seeing a lot of articles about it Refinances are up very big. business is starting to pick up as well, even in this odd season where we typically don't see that in the fourth quarter. But yeah, we're seeing what you're reading about in those articles. You may hear us quoted, but we are...

Even if you don't, we are seeing that in the OB data as well, just seeing increasing refi activity. All right. Let's go talk with the team about what's going on in the market.

Jim Glennon (: 02:30

All right. Welcome team. Welcome. Welcome. Let's talk a little bit about what's going on the world, but also in our own country this past week or so. it probably start with the government shutdown. We're, what are we on? Day 10. Today's Friday. We're recording on Friday because of the Monday holiday. Government still kind of back and forth escalating between the chambers, between the Republicans and Democrats.

I guess typical in these situations, each side blames the other for the continuation of it. Furloughs are taking I don't know, I was traveling the last couple of days, but I didn't see a lot in the way of delays, but I guess historically when these things happen, furloughed workers, not getting paid as they're working. I guess they get paid in arrears once the shutdown ends, but it does lead to things like burnout and people take a lot more sick time.

And that's starting to affect things like air traffic control and some other critical functions, right? The folks that are actually are working right now. And obviously the non-critical that's becoming a little messy, almost literally, but very literally as well. Like things like the bathrooms at the national parks, right? Aren't being attended to. Anyway, Alex, you got some good notes on this. Like where do you see this today? And I don't know. Do you feel like there's any way to predict the prospects of this or how long it lasts?

Alex Hebner (: 03:54

Yeah, like you said, it's day 10. All the major news outlets are kind of flying as blind as we are on doesn't seem to be any ⁓ into the shutdown in sight. Democrats are sticking hard and fast to their Obamacare tax credits that they want to health care costs the Affordable Care Act skyrocketing if they were done away with. Republicans just pushing to get a budget through so they can end this whole thing.

yeah, there really doesn't seem to be much reaching across the aisle at the moment to get this a broad economy standpoint, I think as we come up on one full pay period, everyone, as you said, will be paid in arrears. I think that's gonna start becoming painful because regardless of what you might personally think, the size of the US federal government should be, it is a major employer the country, more so in certain jurisdictions than others.

the end of the day, large swaths of people aren't getting paid it just makes it difficult to make ends meet and that has effects throughout the economy. If you're not getting paid, you might not be able to pay your credit card bill on time stuff like that. Senate is going home for the weekend, for the long weekend, good on them. yeah, they're going to reconvene on Tuesday, ⁓ which I guess kind of tells you.

know how seriously they view if you can take a weekend off they don't view it as you know, quite dire yet did get a Military spending bill pushed through the Senate late last night that will ensure that you know military members of which there's a million plus or so of active duty members in the military They'll be paid during this this period so, you know a little bit of a reprieve there but again the main pain point that I see as this stretches on is it's just

all those federal workers who are going without a paycheck for the time being.

Jeff (: 05:39

also saw this morning government may be going through laying off federal workers completely, which was a threat they had and seems like a little bit of movement this morning. There's already lawsuits being filed against that,

one to watch out for, which is not normal during a government short down to have layoffs like this. of course, that's been a threat by the administration and looks like they're going to try to follow through with that as of this morning.

Jim Glennon (: 06:07

Yeah, mean, the politicians might not think that this is a big deal, but you made good points there, Alex. mean, real people, the largest employer in the country is not paying their employees. So there's folks that this could lead to short-term delinquency issues, certainly could have effects on things like inflation, probably in a negative way, in a downward, right? People may stop spending money, sales start dropping. think in general, this is going to a little bit of maybe grassroots animosity.

Alex Hebner (: 06:08

Thank you.

Jim Glennon (: 06:36

from those employees as it relates to their employer. Yeah, there's definitely far further reaching implications than just what's in the headlines. It feels like today.

Kevin Foley (: 06:45

I remember in 2019, think the last time we went around this and Jim, you mentioned this earlier with air traffic control being short staffed and potential ripples we start to see there. Remember that reaching a pretty, fever pitch last time around once we started having, you know, like ground stops and things due to, short staffing. So it seems like maybe we've seen a little bit of that.

you know, I feel like that's one thing to watch for, you know, as time goes on is if we start to see more of that, I think that's really going to ramp the pressure for folks to just strike a deal.

Jim Glennon (: 07:21

You would think so, just the of it, right? Affecting real people and that starting to get into the news and maybe potentially getting uglier. think it would be motivation, you would think, for both sides to get something done and the pressure would start to build. hopefully nothing bad happens, right? I mean, there's a lot of these, we're getting the military piece pushed through, which is first and foremost, right? Security of the country is very important, but there's other areas.

of government that do a lot of good things around the country. So you would hope that you had nothing kind of falls through the cracks during this period.

Kevin Foley (: 07:58

Yeah. Hopefully, you know, a lot of folks in the mortgage industry getting ready to hop on a plane to go to Vegas and you know, another 10 days or so. you know, just another thing to, be aware of as this is playing out.

Jim Glennon (: 08:11

Yeah, and our small part of the world, the country. So I mean.

Alex Hebner (: 08:16

Small

silver lining this morning, though, I did see a headline, I think Jeff posted about they are going to bring back furloughed BLS members to get the CPI number out next week. So we were not expecting to see a CPI number just because we weren't expecting this shutdown to be resolved by midweek next week. they are going to get the CPI number out. And it sounds as if that's mainly because this is the end of the accounting period for calculating social security inflation for next year. So they have to get this number out for.

that social security number to be accurate next year.

Jeff (: 08:48

So we'll probably see the employment report from last month as well, in addition to getting those CPI numbers out. So we'll see when both of those come out sometime next week, presumably.

Jim Glennon (: 09:02

Good. That's probably a welcome development. It's an interesting technicality that they're using to push that through. So that's positive, but also, yeah, there's been a lot more talk about the labor situation and folks are using different proxies at this point from Wall Street analysts to ADP and just everything kind of looks pretty negative. So it will be interesting to see what that official report says and how it compares to the last few and some of the revisions. So yeah, looking forward to seeing that here soon.

Otherwise, mean, not much movement in rates because of the shutdown, but we did have some developments just as we were getting ready to record this podcast today that have pushed the equity market, pushed all markets around pretty heavily. So when you're all listening to this on Monday, the market will be closed, but you will remember that on Friday, at this point, the equities are down like 2%. The 10 years closing in on 4%, like really seeing a big shift in the market.

And a big reason for that was just continued policy fighting between us, between the US and China over trade issues once again.

Kevin Foley (: 10:14

in some backstory there, instituted a new policy regarding the exports of rare earth that is more restrictive. there's a lot of nuance in the details there. there is a response from the administration negatively to that and threatening high percentage of tariffs.

back at China and retaliation. so it might be a good reminder if we zoom almost all of the gains in the S &P 500 over the last three years or so are concentrated in a very small number of 10 or that, mostly related to the AI boom. And of course, AI relies on chips and chips need rare earth minerals, so it all sort of ties back together.

least in the equity market side of the house. that's of the context behind what we're seeing between China and the administration going back and forth today.

Jeff (: 11:15

Just what it felt like, tariff talk was dying down a little bit. The actual implied tariffs being charged weren't nearly as high as what was being discussed during liberation day. It of felt like we were getting through it, right? The inflation numbers weren't as bad because of tariffs, and now it just pops back up. So just a reminder, I think the tariff conversation is not going to go away probably for a long time, and we're going to have flare-ups like this probably for a while.

Jim Glennon (: 11:44

Yeah, I mean, it's, you know, the, the frog boils slowly for a while and then they, they decide it's not boiling fast enough, I guess. And, you know, we hit each other where it hurts and you get this news that really puts a damper on the market, hopefully short-lived. But I don't know if there's a, is it a stretch to say a parallel could be drawn between what's going on between us and China and what's going on between the Democrats and the Republicans right now. It's just sort of an escalation hoping to have some resolution. you know, I've seen some articles say at least the

Government shutdown issue is likely to get worse before it's resolved. Maybe the same could be said about tensions between us and China, but it does. Hopefully we're not lulled to sleep. Hopefully there is a resolution there that's okay for both sides. And we get through that and we allow the market to kind of go back to focusing on actual economic numbers. yeah, we're kind of in between two crises going on right now, it feels like, if not more.

Alex Hebner (: 12:39

And I just like to point out that I think this was all spurred by a single post and we're off 2%, which I think just kind of goes to show how the markets are already in a very precarious, I don't want call precarious, but they're at all time highs off of massive gains as Kevin pointed out from a handful of semiconductor stocks that are open to change due to geopolitical changes.

You know, he didn't even name a number or anything. All he said was, you I don't like this. I'm thinking about more tariffs. Didn't name a number and, you know, a meeting that was scheduled for next month in South Korea between him and she is off. know, if we start to see hard numbers, you know, we could see, you know, some of the volatility that we saw back in April for, you know, about five, six days there before the walk back on, on liberation day. But yeah, I just think it's just good to, you know, keep a fresh mind on it. Don't, don't get lulled to sleep by, by expecting, you know,

Jim Glennon (: 13:08

Mm-hmm.

Alex Hebner (: 13:30

the same resolution that we saw in April of just a slow crawl back and above and beyond. to come here, I would say.

Jim Glennon (: 13:37

Definitely. Yeah. mean, you're hard to know what to invest in right now, but there's an article on anything you could even think about investing and telling you that you really should or really shouldn't. Lately, it's been rare earth metal miners, or just generally speaking, metals, right? Which have been moving upwards for the last six to nine months or so, but not just because of some of these trade issues, but just in general, because of some of the isolationist policies, potentially, right?

You can read articles right now about exactly why that is. They're calling it a debasement strategy at this point or debasement play. Is the US dollar continuing to be threatened or to be devalued? And if so, what should you be investing in? It's separate but related to some of these arguments or negotiations with China and other countries, but it is crazy how much gold never moves really historically.

unless you have situations like this that are very uncertain and gold's up. think you looked Alex before the pod 50 % this year. That's the biggest move I've seen in my lifetime, I think.

Kevin Foley (: 14:46

very big move.

Alex Hebner (: 14:46

Here today, yeah, it's up 50%.

Kevin Foley (: 14:48

I had done a little back of the napkin some help from chat GPT, but I was curious around if what all of the flows that are going into gold had instead gone into treasuries, US treasuries or US assets, what would that look like? And I just, compared just the flows from gold's

estimated based on supply and demand, then that to treasuries. It's actually a fairly small influence in treasuries from a basis point perspective, across the yield curve. seem like you can make the argument that, assets were attracting

more demand instead of gold? Could that lower the 10-year? It doesn't really seem like that's the case. But the flip side of that is, it does seem like very of peel-off demand from Treasuries can have these big influence on asset prices outside of US Treasuries. I thought it was kind of interesting. Again, back of the napkin, so this isn't official and all that, but.

Jim Glennon (: 15:33

Right.

Kevin Foley (: 15:57

it did all you know that the numbers seem to check out in terms of you the overall impact

Jim Glennon (: 16:02

Yeah. mean, what you're saying is it's just like gold is a much smaller market than US treasuries, right? Which I would totally buy, right? I mean, we've talked on a recent podcast about how enormous the US treasury supply, demand, and just holdings are and how just enormous of a market that is, which makes it harder to move it, also has a big influence on mortgage rates, whereas gold, smaller market, you'll get a bigger move from,

Kevin Foley (: 16:07

Mm-hmm. Yep.

Jim Glennon (: 16:26

A hundred billion dollars moving this way or another, which is a hundred billion dollars of treasuries is nothing.

Kevin Foley (: 16:32

Yep, for sure.

Jim Glennon (: 16:34

Well, we have to have a whole cast on metals if we keep having some of this crazy activity and just how it interacts with rates, right? So we can tie it all back to what we're all dealing with today, which is where mortgage rates are. But again, they'll be a little bit lower come Tuesday, most likely, unless we get a shift in the market. Because we touched that 4 % on the treasury. That tends to be a little bit of a psychological barrier for people. You might see us go lower from there.

Kevin Foley (: 17:00

Yeah. Well, if we get any deeper into heavy metals, we're to have to ask Jeff to whip out his guitar and start hitting on some Metallica and just playing the hits.

Jim Glennon (: 17:01

Alright.

⁓ no.

Jeff (: 17:09

Yeah.

Jim Glennon (: 17:11

Somebody had to say it.

Jeff (: 17:14

Pantera, man.

Jim Glennon (: 17:15

Pantera, that's hard.

Kevin Foley (: 17:16

Hahaha

Jim Glennon (: 17:19

All right, anything else, gentlemen?

all right. Thanks everybody.

Alex Hebner (: 17:20

think that just about covers it.

Jim Glennon (: 17:23

Okay. Welcome back everybody. We had Justin Monahan from TradeWeb on last week talking with Jeff and got a little bit into the technical details of the MBS market. We talked a lot about MBS, right? And we talked about how TradeWeb is at the center of that really. They have a majority of MBS trades that happen on that platform, which is pretty wild. And talked a little bit about how MBS affect mortgage rates and are generally influenced by

prevailing rates throughout the country and throughout the world. So we thought it was maybe a good time to pump the brakes for a second and kind of take a lateral move into a little bit of MBS 101. Like what is a mortgage backed security? Why does it exist? Why is it unique in the world? Why is an American MBS unique? And what should we be watching out for as originators, as borrowers, as secondary marketing people, just as mortgage interested parties?

Why do care about MBS? So we're just going to do like a five, 10 minute about that with this crew. And I'm going to drive it along a little bit with some key points, but kind of starting with what is a mortgage backed security, right? What is an MBS? I mean, it's really at its simplest level. It's a package of mortgages that gets bundled up and sold to investors, right? And we've talked about who those investors could be. It was the Fed for a while.

can be individual through money managers. could be pension funds, can be foreign governments, foreign basically there's some conformity to it, right? It's not as if these MBS are all created different. We've talked a lot about how you do have some MBS that maybe have small loan balances, high loan balances, certain geographic.

concentrations, but in general, they're pretty similar things. It's up package of mortgages with an average interest rate that then gets paid to whoever owns that bond or that package.

Kevin Foley (: 19:24

Yeah, and I think

that the word securitize, you know, sometimes trips people up, but it's really just, you know, preparing, know, an asset to be invested in. So it allows you to, invest in an asset. lots of things can be securitized. Even fun fact, David Bowie's music catalog been securitized for investment so you can invest in his music royalties. So it's really not, it's really just about taking, you know, an asset.

you know, this case mortgages and then preparing that so that it becomes an investment instrument.

Jim Glennon (: 19:58

That is a fun fact. I've got one that's, I got a fact that's not as fun, but it's interesting in this There's some 16 trillion in MBS floating around out there somewhere on any given day. So that's like half the national debt, which basically represents the debt of our houses, right, in America. So I thought that was kind of a cool stat, 16 trillion. So relatively what we were talking about earlier, you know, whatever the...

The amount of gold is in the world that's being invested in investing in MBS is like a $16 trillion business. So why, I mean, why does MBS exist? Right? It may sound like a dumb question, but you have to go back a bit, almost a hundred years to really get to why MBS really became a thing in our country, in the U S. another fun fact started with the new deal, right? FDRs new deal. If y'all remember.

, high school, history class,: 1938

During most eras and most times, it's been for like a middle-class family to buy a home, right? It's weird to think about it, but in a lot of countries, that's not even possible. It certainly isn't possible with a 30-year fixed mortgage. People will look at you funny if they come from, our, have coworkers that live in Canada and they'll ask you 10 questions about what a 30-year fixed is. And it's just a 30-year loan that has one rate in payment for 30 years. They can't believe it.

Kevin Foley (: 21:50

Yeah, it's a it is and I know we've talked about this before the podcast, you know, very unique to the US. one of the points that you were making there, Jim was kind of having the conformity of mortgage backed security plays an important role in the overall market. Because if we didn't have this, you know, kind of central standard of what a mortgage that it can be, you know, securitized and then

prepped for investment, have just a decentralized credit market across the country. And those credit markets wouldn't be as liquid because you don't have the conformity. You don't have the volume to be able to allow traders to know that there's going to be someone on the other side who's willing to buy or sell. that whole component of the market helps keep interest rates net-net lower. If the credit market was decentralized, if there wasn't a conforming 30-year fix, maybe there is a

California 30 year fixed or a New York 30 year fix or Texas. they just operated in those zones, those markets wouldn't be as liquid as having a national market and then rates net net would be higher. luck out on multiple fronts in the US with this. have lower interest rates because of the conformity of the market, the liquidity of the it's a fixed instrument.

We have enough housing that it supports liquidity as well, last for 30 years. It's very similar to like investing in US treasuries with that implicit government backed guarantee. So it's a really special market that we have here a part of. all have some role in helping support that market, sometimes don't always realize just how unique it is.

all of the different factors that are helping it work.

Jim Glennon (: 23:38

Agreed. It's easier to set a price and therefore everybody knows what it's worth. So it's easily traded and that then contributes to rates, right? Contributes to what we're paying for mortgages. We've talked on here about how the Fed does not control mortgage rates. The MBS market does. The 16 trillion that are out there were once bought or sold, many times over bought and sold on the open market. And there's billions, if not trillions every month change hands and everybody knows what that price is, but it's all based on supply and demand, right? That's how we get.

to our mortgage rates that we post on our OBMMI or that you see on bank rate or you go to your bank and you get, and that's why that rate, you're not going to see a huge difference between two banks across the street from each other, let alone a bank in New York and a bank in California. They're all basing their pricing on the very same market that your lender does.

should we be watching out for, right? People talk about stocks more than anything. If you're watching the news, if you're reading the journal

wherever you look for your financial news, it's kind of tough to get to bond news, especially MBS. You hear about treasury sometimes, which is like the largest debt market in the world. But as we said, $16 trillion outstanding in MBS yet rarely talked about. So what do we want to keep an eye What some simple things we can keep an eye on?

Jeff (: 24:53

Yeah, if you kind of think about breaking down what that 30 year rate represents, in terms of risk or, ⁓ well, I guess return to, is investing or, or lending that money, right? You know, we talk a lot about how mortgages follow treasuries pretty closely, but they don't always follow them exactly. So you kind of start with.

going shamelessly steal a post I saw on LinkedIn. think originally from Freddie Mac a few years ago, kind of like building up a mortgage rate. you start with, it a risk free rate, right? The risk free rate, can assume it's kind of like the 10 you know, some risk free rate, even, you know, the, fed funds rate at some level, right? And then you start from there and you build it up and you say, all right, what is the, you know, a 30 year rate to a borrower represent?

Well, the borrower isn't going to, you know, not every borrower is going to have mortgage for 30 years, right? They're going to, they're going to move, they're going to refinance. And so you're estimating what is the return you need for a loan that lasts on average five to seven years. Right. So you kind of blend in some sort of return of what you would expect to, have for, for, for five to seven years there. And then you think about, you know, what is the risk premium I need?

for these types of borrowers and you add in a little bit of a chunk of rate on top of that rate from there. And you kind of keep building up with, with some of those, ⁓ types of things. you say, all right, how much then at that point, now that I've got to this kind of baseline rate, what is that worth to me? as an investor, you kind of start there, you know, we can kind of call that portion,

the secondary market rate, which is really rate of return for these mortgage-backed securities. Not necessarily the rate to the borrower, but the rate of return for these mortgage-backed securities, almost. Super simplified, but just kind of some of the building blocks you can think about about how to build up to that rate.

Jim Glennon (: 26:49

Yeah.

What does that come out to? Like three quarters of a point, three quarters of a percent to a percent. So we're going from like 4 % for a 10 year today to closer to five for the return. If you wanted to buy a bundle or a securitization or a bond full of mortgages, right? So you're at five. But then it goes up from there, right? You've got then some kind of risk premium bond needs to be insured and the relative credit

I mean, this could be argued by the relative credit worthiness of the average American homeowner is not perceived to be as good as that of the US treasury. So there's a guarantee fee. You hear us talk about G-fee, guarantee fee. So about half a percent goes to like Fannie Mae, Freddie Mac to ensure that group of mortgages, right? So if one or 10 of them go delinquent, the bondholder always still gets their money. So that gets added on. So you're like five and a half percent. Then you add

Servicing, The person or the entity that services the loan, meaning they take the payments, they collect if there's delinquencies, they send out statements, remit insurance and taxes, that sort of thing. That's always, you know, call it roughly a quarter point. we're, what are we at? Five, seven, five. Then you build in things like origination and LLPAs, right? There can be differences in people's credit from one person to another. people who originate these mortgages.

Some of you are out there listening, they have to get paid, right? So call that. All of those things, another quarter to three eighths of a point. So you're just over six. So that's where we're at today. 4 % on treasuries, six and an eighth or so, hopefully a little bit lower by Tuesday mortgages. that's...

Jeff (: 28:31

Yeah, and

that's kind of like the average rate holding that original mortgage-backed security is worth kind of like 100 % of the face value of the loan, what we would call par, right? And then if you have some mortgage-backed security that's below that in rate, it's gonna be worth less than 100%, or some mortgage-backed security that's above that rate is gonna be worth more than again, those...

You know, maybe here we can talk about then how do those values fluctuate on a minute to minute basis.

Jim Glennon (: 29:04

Right. That kind of ties it back to what you talked to Justin about last week. goes back and back to what we talked about six minutes ago, which is that market that supply and demand market that drives rates. So it gives us the ability to have different rates. Like not everybody gets exactly the same rate, but you will get the close to the same rate. Plus when you figure in what fees you're going to pay, like why would someone want a higher rate? You might ask like, why would someone want a six and a half or six, seven, five? Cause it might.

allow your originator to give you a little money back for things like closing costs, especially on a refi where maybe you don't want to bring $10,000 in to pay for the rate and to pay for fees and LLPAs. maybe you want a much lower rate. You want four and half percent. You can do that. Most lenders will let you get a four and a half percent rate, but you're going to have to bring a lot more money with you to the closing table to buy that, what they call buy that rate down, right? Because that bond is probably only going to go for 95 cents on the dollar because that

rate that the bond holder is getting paid is closer to three and a half, they're going to not pay a full dollar for dollar on that because the yield is lower.

I think that all made sense. So then, you know, what should we be watching out for? What might change in the near future? We've dabbled in this a little bit on these podcasts. treasuries move, yields on mortgages are likely going to move very similar, but that spread that we've talked about that Jeff and I walked you through, that can change. And that has changed over the years with supply and demand and other things. like, it was really thin, for instance, when the Fed was buying because they've

I mean, they're a buyer that doesn't, they weren't in a position to do a lot of like analysis between should I, should I buy gold or should I buy MBS? Right. They were just buying MBS and treasuries at a crazy rate. also the GSEs for instance, used to MBS the great financial crisis, before they were put into conservatorship. There's some people that think that could change. The FHFA may come in and say, you can buy MBS again so that you can better regulate that spread.

I'm not saying it's going to happen, just some people think it might. So that spread could go from the example we just talked about, which was close to 2%, could go a little bit lower if the GSEs want to build up their portfolio a little bit. And even I think news of something like that being a possibility could cause just others to jump in and want to buy those bonds because they're likely going to be worth more. And that would put us into the fives right now, which should be kind of fun, kind of interesting. it might be one of the-

one of the nuclear options for the administration who really wants to do something about home affordability and it would make an enormous difference.

Kevin Foley (: 31:44

Yeah, for sure. mean, just the thought of rates in the fives after several years in the sixes and sevens and pushing eight at times would ⁓ be welcome news for sure if we can get there.

Jim Glennon (: 31:57

For sure. Otherwise, yeah, I there's other extraneous factors that could affect that spread, but a lot of it would probably have to be policy driven, changes at the GSEs, changes with government bonds. But in general, otherwise you're looking at Treasuries and you're looking at what affects them if you're wondering where rates are going to go. So things like Fed announcements can have an influence. They don't directly control, but can have an influence. that generally would lower rates like bad jobs numbers, like we talk about every week. If we get a bad jobs number.

When the BLS this next report out, we will probably see rates continue to drop a little bit. That's the usual direction. But then again, then you get the CPI number, maybe that's a little bit hot and rates go up because the expectations are that the rates are higher. just back to supply and demand, just government spending. Any changes in news on that, which it always seems to be news that government spending is going to increase across the world, not just us.

There's a lot of debt out there that needs to get bought. So the rates just continue to go higher to attract that cash.

Kevin Foley (: 33:02

Yep, for sure. I saw a take out there recently that was trying to explain how we might see yields moving sort of independently from equity prices in the current market and stock prices are tracking the AI economy. Because normally stocks and bonds move opposite each other, but stocks today more tracking the AI economy whereas

know, treasury yields, bond yields are more closely tracking the labor market data. So, you know, those can move somewhat independently. there are some days we see stocks go up, yields go down and, you know, vice versa. So of nuance to what's happening in the markets these days.

Jim Glennon (: 33:45

Yeah, a lot of different moving parts, as you said, and it's not always intuitive the way it used to be. But when you break it down, it ends up making sense that yeah, bad jobs number means slower economy probably should mean lower stocks, but should mean that the price of bonds goes up, right? Which brings the rates on bonds down.

Cool, fun discussion. should do this a couple of times a year. All right. Hope everybody enjoyed it. Thanks everyone.

Jeff (: 34:11

Yeah.

Thanks.

Jim Glennon (: 34:15

Wow, another great episode. Let's close this thing out. Thank you, Kevin, Jeff, Alex. Great discussion today. Talked a little bit about the market. I talked a little bit about MBS that's it for today. Join us next week for another episode of Optimal Insights where we'll continue to provide you with the latest market analysis and insights to help you stay ahead. Check out our full videos on YouTube.

You can also find each episode on all major podcast platforms. Thank you again for tuning into Optimal Insights.